All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Artesian Resources in Focus
Artesian Resources (ARTNA) is headquartered in Newark, and is in the Utilities sector. The stock has seen a price change of -4.06% since the start of the year. The water resource management company is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 2.8% compared to the Utility - Water Supply industry's yield of 1.8% and the S&P 500's yield of 1.82%.
In terms of dividend growth, the company's current annualized dividend of $1 is up 1.6% from last year. Artesian Resources has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 2.96%. 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. Right now, Artesian Resources's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ARTNA for this fiscal year. The Zacks Consensus Estimate for 2020 is $1.68 per share, with earnings expected to increase 5% from the year ago period.
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. 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, ARTNA 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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