Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating 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 earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Carter's in Focus
Headquartered in Atlanta, Carter's (CRI) is a Consumer Discretionary stock that has seen a price change of -30.05% so far this year. The maker of children's apparel and accessories is paying out a dividend of $0.75 per share at the moment, with a dividend yield of 4.24% compared to the Shoes and Retail Apparel industry's yield of 1.4% and the S&P 500's yield of 1.71%.
In terms of dividend growth, the company's current annualized dividend of $3 is up 114.3% from last year. Carter's has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.13%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Carter's's payout ratio is 40%, which means it paid out 40% of its trailing 12-month EPS as dividend.
CRI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $8.81 per share, representing a year-over-year earnings growth rate of 11.94%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CRI is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Carter's, Inc. (CRI) : Free Stock Analysis Report
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