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This is Why Kronos Worldwide (KRO) 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Kronos Worldwide in Focus

Based in Dallas, Kronos Worldwide (KRO) is in the Basic Materials sector, and so far this year, shares have seen a price change of 4.4%. The maker of titanium dioxide pigments is currently shelling out a dividend of $0.19 per share, with a dividend yield of 4.85%. This compares to the Chemical - Diversified industry's yield of 1.9% and the S&P 500's yield of 1.56%.

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In terms of dividend growth, the company's current annualized dividend of $0.76 is up 5.6% from last year. Over the last 5 years, Kronos Worldwide has increased its dividend 3 times on a year-over-year basis for an average annual increase of 3.44%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Kronos Worldwide's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for KRO for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.06 per share, with earnings expected to increase 110.20% from the year ago period.

Bottom Line

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their 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, KRO 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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