AAll investors love to earn big returns from their portfolio, whether through stocks, bonds, ETFs, or other types of securities. But when you are an income investor, your main goal is to generate 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 profits paid to shareholders; it is often viewed by its dividend yield, a measure that measures a dividend as a percentage of the current stock price. Numerous academic studies show that dividends are a large part of long-term returns, and in many cases dividend contributions exceed one-third of total returns.
The T. Rowe award at a glance
Baltimore-based T. Rowe Price (TROW) is in the finance industry, and so far this year the stocks have seen a 29.04% price change. The financial services company currently pays a dividend of $ 1.08 per share, with a dividend yield of 2.21% compared to the performance of the finance industry – Investment management of 1.71% and yield of the S&P 500 of 1.4%.
When it comes to dividend growth, the company’s current annualized dividend of $ 4.32 is up 20% from last year. T. Rowe Price has increased its dividend 5 times year on year over the past 5 years for an average annual increase of 15.97%. Any future dividend growth will depend on both earnings growth and the payout ratio of the company; a payout ratio is the proportion of a company’s annual earnings per share that it pays out as a dividend. Right now, T. Rowe’s payout ratio is 37%, which means he’s paid 37% of his 12-month EPS as a dividend.
Profit growth looks strong for TROW this year. Zacks’ consensus estimate for 2021 is $ 12.92 per share, with earnings expected to rise 34.86% from the previous year.
Investors love dividends for many reasons; they dramatically improve the returns on equity investments, lower overall portfolio risk, and provide tax benefits, among other things. But not all companies offer quarterly payment.
Large, established companies that have safer earnings are often considered the best dividend options, but it is quite rare to see high growth companies or tech start-ups offering a dividend to their shareholders. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. With this in mind, TROW is a compelling investment opportunity. Not only is this a big dividend game, the stock currently sits at Zacks rank of 3 (Hold).
Technological IPOs with huge profit potential
Over the past few years, many popular platforms like Uber and Airbnb have finally made their way into the public markets. But the biggest wins have come from lesser-known names.
For example, electric car maker X Peng climbed + 299.4% in just 2 months. Think of it this way …
If you had put $ 5,000 in XPEV when it went public in September 2020, you could have withdrawn $ 19,970 in November.
With record amounts of cash flowing in IPOs and a record stock market, this year’s lineup could be even more lucrative.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.