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.
Sonoco in Focus
Sonoco (SON) is headquartered in Hartsville, and is in the Industrial Products sector. The stock has seen a price change of 11.22% since the start of the year. The packaging maker is currently shelling out a dividend of $0.41 per share, with a dividend yield of 2.78%. This compares to the Containers - Paper and Packaging industry's yield of 2.46% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.64 is up 1.2% from last year. In the past five-year period, Sonoco has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.25%. 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. Sonoco's current payout ratio is 49%. This means it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SON expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.51 per share, which represents a year-over-year growth rate of 4.15%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, 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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