Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Sanofi in Focus
Headquartered in Paris, Sanofi (SNY) is a Medical stock that has seen a price change of 5.33% so far this year. The drugmaker is currently shelling out a dividend of $1.38 per share, with a dividend yield of 2.7%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.51% and the S&P 500's yield of 1.74%.
In terms of dividend growth, the company's current annualized dividend of $1.38 is up 9.5% from last year. Sanofi has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 2.54%. 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, Sanofi's payout ratio is 29%, which means it paid out 29% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SNY expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $4.47 per share, which represents a year-over-year growth rate of 2.76%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SNY 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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