Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
PGE in Focus
Headquartered in Portland, PGE (POR) is a Utilities stock that has seen a price change of -24.13% so far this year. The electric utility is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 3.64% compared to the Utility - Electric Power industry's yield of 3.48% and the S&P 500's yield of 1.77%.
Looking at dividend growth, the company's current annualized dividend of $1.54 is up 1.4% from last year. In the past five-year period, PGE has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.09%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. PGE's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for POR for this fiscal year. The Zacks Consensus Estimate for 2020 is $2.41 per share, representing a year-over-year earnings growth rate of 0.84%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, POR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Portland General Electric Company (POR): Free Stock Analysis Report
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