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.
Sonoco in Focus
Sonoco (SON) is headquartered in Hartsville, and is in the Industrial Products sector. The stock has seen a price change of 23.15% since the start of the year. The packaging maker is paying out a dividend of $0.43 per share at the moment, with a dividend yield of 2.63% compared to the Containers - Paper and Packaging industry's yield of 2.16% and the S&P 500's yield of 1.88%.
Looking at dividend growth, the company's current annualized dividend of $1.72 is up 6.2% from last year. Sonoco has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.04%. 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, Sonoco's payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.
SON is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.58 per share, representing a year-over-year earnings growth rate of 6.23%.
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.
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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SON 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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Sonoco Products Company (SON) : Free Stock Analysis Report
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