Eastman Chemical (EMN) Could Be a Great Choice

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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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.

Eastman Chemical in Focus

Based in Kingsport, Eastman Chemical (EMN) is in the Basic Materials sector, and so far this year, shares have seen a price change of 7.77%. The specialty chemicals maker is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 3.35% compared to the Chemical - Diversified industry's yield of 1.92% and the S&P 500's yield of 1.59%.

Taking a look at the company's dividend growth, its current annualized dividend of $3.24 is up 1.9% from last year. Eastman Chemical has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.14%. 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. Eastman Chemical's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, EMN expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $7.71 per share, which represents a year-over-year growth rate of 20.47%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EMN 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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