Why Eastman Chemical (EMN) is a Great Dividend Stock Right Now

·3 min read

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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Eastman Chemical in Focus

Eastman Chemical (EMN) is headquartered in Kingsport, and is in the Basic Materials sector. The stock has seen a price change of 6.94% since the start of the year. The specialty chemicals maker is currently shelling out a dividend of $0.69 per share, with a dividend yield of 2.57%. This compares to the Chemical - Diversified industry's yield of 1.58% and the S&P 500's yield of 1.37%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.76 is up 3.4% from last year. Over the last 5 years, Eastman Chemical has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.68%. 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. Eastman Chemical's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, EMN expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $9.18 per share, which represents a year-over-year growth rate of 49.27%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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, EMN 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).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Eastman Chemical Company (EMN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting