All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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
Headquartered in Kingsport, Eastman Chemical (EMN) is a Basic Materials stock that has seen a price change of 10.98% so far this year. The specialty chemicals maker is currently shelling out a dividend of $0.69 per share, with a dividend yield of 2.48%. This compares to the Chemical - Diversified industry's yield of 1.28% and the S&P 500's yield of 1.31%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.76 is up 3.4% from last year. Eastman Chemical has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.98%. 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. Right now, Eastman Chemical's payout ratio is 45%, which means it paid out 45% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EMN for this fiscal year. The Zacks Consensus Estimate for 2021 is $7.87 per share, which represents a year-over-year growth rate of 27.97%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, 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).
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Eastman Chemical Company (EMN) : Free Stock Analysis Report
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