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Conagra Brands (CAG) Could Be a Great Choice

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Conagra Brands in Focus

Based in Chicago, Conagra Brands (CAG) is in the Consumer Staples sector, and so far this year, shares have seen a price change of -4.03%. The company is paying out a dividend of $0.33 per share at the moment, with a dividend yield of 3.55% compared to the Food - Miscellaneous industry's yield of 0.11% and the S&P 500's yield of 1.63%.

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Taking a look at the company's dividend growth, its current annualized dividend of $1.32 is up 5.6% from last year. In the past five-year period, Conagra Brands has increased its dividend 3 times on a year-over-year basis for an average annual increase of 11.23%. 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, Conagra Brands's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CAG for this fiscal year. The Zacks Consensus Estimate for 2023 is $2.66 per share, which represents a year-over-year growth rate of 12.71%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CAG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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