Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Xilinx in Focus
Xilinx (XLNX) is headquartered in San Jose, and is in the Computer and Technology sector. The stock has seen a price change of 5.52% since the start of the year. The computer chipmaker is currently shelling out a dividend of $0.36 per share, with a dividend yield of 2.02%. This compares to the Semiconductors - Programmable Logic industry's yield of 1.95% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $1.44 is up 2.9% from last year. Xilinx has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.74%. 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. Xilinx's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for XLNX for this fiscal year. The Zacks Consensus Estimate for 2018 is $2.98 per share, with earnings expected to increase 5.30% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that XLNX is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.