Sun Life (SLF) 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. However, 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 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.

Sun Life in Focus

Headquartered in Toronto, Sun Life (SLF) is a Finance stock that has seen a price change of 6.27% so far this year. The financial services company is paying out a dividend of $0.56 per share at the moment, with a dividend yield of 4.08% compared to the Insurance - Life Insurance industry's yield of 0.07% and the S&P 500's yield of 1.59%.

In terms of dividend growth, the company's current annualized dividend of $2.25 is up 1.7% from last year. Sun Life has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 9.76%. 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. Sun Life's current payout ratio is 48%, meaning it paid out 48% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, SLF expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $5.09 per share, which represents a year-over-year growth rate of 8.07%.

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 have to be mindful 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 SLF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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Sun Life Financial Inc. (SLF) : Free Stock Analysis Report

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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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