All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Sempra in Focus
Headquartered in San Diego, Sempra (SRE) is a Utilities stock that has seen a price change of 26.64% so far this year. The natural gas and electricity provider is currently shelling out a dividend of $1.14 per share, with a dividend yield of 2.73%. This compares to the Utility - Gas Distribution industry's yield of 2.8% and the S&P 500's yield of 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.58 is up 4.1% from last year. Over the last 5 years, Sempra has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.18%. 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. Right now, Sempra's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for SRE for this fiscal year. The Zacks Consensus Estimate for 2022 is $8.60 per share, with earnings expected to increase 2.02% from the year ago period.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SRE presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Sempra Energy (SRE) : Free Stock Analysis Report
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