Whether through stocks, bonds, ETFs or other types of securities, all investors love to see their portfolios generate significant returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary goal.
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.
Sempra in brief
Based in San Diego, Sempra (SRE – Free Report) is in the utilities sector, and so far this year the stocks have seen a price change of 1.59%. Currently paying a dividend of $ 1.1 per share, the company has a dividend yield of 3.4%. In comparison, the performance of the utility industry – gas distribution is 2.94%, while the return of the S&P 500 is 1.37%.
Looking at the company’s dividend growth, its current annualized dividend of $ 4.40 is up 5.3% from a year ago. Over the past 5 years, Sempra has increased its dividend 5 times year on year for an average annual increase of 7.91%. Going forward, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as dividends. Right now, Sempra’s 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, SRE expects solid earnings growth. Zacks’ consensus estimate for 2021 is $ 8.20 per share, which represents a year-over-year profit growth rate of 2.12%.
Whether it’s dramatically improving earnings from equity investments and reducing overall portfolio risk or offering tax benefits, investors love dividends for a variety of reasons. It is important to keep in mind that not all companies provide 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, SRE presents a compelling investment opportunity; It’s not only an attractive dividend game, but the stock also enjoys a solid Zacks rank of No.2 (buy).