AAll investors love to earn big returns from their portfolio, whether through stocks, bonds, ETFs, or other types of securities. But when you’re an income investor, your main goal is to generate consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors focus on dividends. A dividend is that coveted distribution of a company’s profits paid to shareholders, and investors often view it by its dividend yield, a measure that measures the 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.
IdaCorp in brief
Boise-based IdaCorp (IDA) is a utility stock that has seen a 7.24% price change so far this year. Currently paying a dividend of $ 0.71 per share, the company has a dividend yield of 2.76%. In comparison, the performance of the Utilities – Electric Power industry is 3.3%, while the return of the S&P 500 is 1.45%.
When it comes to dividend growth, the company’s current annualized dividend of $ 2.84 is up 4.4% from a year ago. In the past 5 years, IdaCorp has increased its dividend 5 times year over year for an average annual increase of 6.76%. 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. IdaCorp’s current payout ratio is 56%, which means it has paid out 56% of its past 12-month EPS as a dividend.
Based on this fiscal year, IDA expects solid earnings growth. Zacks’ consensus estimate for 2021 is $ 4.85 per share, which represents a year-over-year profit growth rate of 3.41%.
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. It’s important to keep in mind that not all companies offer quarterly payment.
High-growth companies or tech start-ups, for example, rarely pay their shareholders a dividend, while larger, more established companies with safer earnings are often seen as the best dividend options. During times of rising interest rates, income investors should be aware that high yielding stocks tend to struggle. With this in mind, IDA is an irresistible investment opportunity. Not only is this a big dividend game, the stock currently sits at Zacks rank of 3 (hold).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.