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.
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.
Eaton in Focus
Eaton (ETN) is headquartered in Dublin, and is in the Industrial Products sector. The stock has seen a price change of -12.72% since the start of the year. The power management company is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 2.15% compared to the Manufacturing – Electronics industry’s yield of 0.6% and the S&P 500’s yield of 1.58%.
Taking a look at the company’s dividend growth, its current annualized dividend of $3.24 is up 6.6% from last year. Over the last 5 years, Eaton has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.57%. 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. Eaton’s current payout ratio is 47%. This means it paid out 47% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ETN expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $7.55 per share, which represents a year-over-year growth rate of 14.05%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ETN 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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Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
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