Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating 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 hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Principal Financial in Focus
Based in Des Moines, Principal Financial (PFG) is in the Finance sector, and so far this year, shares have seen a price change of 27.17%. The financial services company is currently shelling out a dividend of $0.54 per share, with a dividend yield of 3.85%. This compares to the Financial - Investment Management industry's yield of 3.12% and the S&P 500's yield of 1.94%.
In terms of dividend growth, the company's current annualized dividend of $2.16 is up 2.9% from last year. Over the last 5 years, Principal Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Principal Financial's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
PFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $5.69 per share, representing a year-over-year earnings growth rate of 2.89%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PFG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report
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