All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Cabot in Focus
Based in Boston, Cabot (CBT) is in the Basic Materials sector, and so far this year, shares have seen a price change of 15.41%. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 2.28%. In comparison, the Chemical - Diversified industry's yield is 1.95%, while the S&P 500's yield is 1.74%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.48 is up 5.7% from last year. Cabot has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 3.25%. 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. Right now, Cabot's payout ratio is 27%, which means it paid out 27% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CBT for this fiscal year. The Zacks Consensus Estimate for 2022 is $6.15 per share, with earnings expected to increase 22.51% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that CBT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cabot Corporation (CBT) : Free Stock Analysis Report
To read this article on Zacks.com click here.