This is Why Gerdau (GGB) is a Great Dividend Stock
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.
Headquartered in Sao Paulo Sp, Gerdau (GGB) is a Basic Materials stock that has seen a price change of 38.75% so far this year. The steel producer is currently shelling out a dividend of $0.04 per share, with a dividend yield of 2.97%. This compares to the Steel - Producers industry's yield of 0.73% and the S&P 500's yield of 1.41%.
Looking at dividend growth, the company's current annualized dividend of $0.15 is up 47.1% from last year. Over the last 5 years, Gerdau has increased its dividend 3 times on a year-over-year basis for an average annual increase of 17.92%. 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. Gerdau's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.
GGB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $0.55 per share, with earnings expected to increase 89.66% 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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its 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. With that in mind, GGB 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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This article originally published on Zacks Investment Research (zacks.com).
