All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Chesapeake Utilities in Focus
Chesapeake Utilities (CPK) is headquartered in Dover, and is in the Utilities sector. The stock has seen a price change of -10.64% since the start of the year. Currently paying a dividend of $0.44 per share, the company has a dividend yield of 2.06%. In comparison, the Utility - Gas Distribution industry's yield is 3.51%, while the S&P 500's yield is 1.82%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.76 is up 11% from last year. In the past five-year period, Chesapeake Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.44%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Chesapeake Utilities's current payout ratio is 44%. This means it paid out 44% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CPK expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $4.01 per share, which represents a year-over-year growth rate of 9.56%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CPK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Chesapeake Utilities Corporation (CPK): Free Stock Analysis Report
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