Whether it is through stocks, bonds, ETFs or other types of securities, all investors love that their portfolios score high returns. However, when you are an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flows can come from bond yields or interest rates from other types of investments, income investors are finesse on dividends. A dividend is the distribution of a company’s earnings paid to shareholders; it is often seen by its dividend yield, a measure that measures a dividend as a percentage of the current stock price. Many academic studies show that dividends account for significant parts of the long-term return, where dividend contributions in many cases exceed one third of the total return.
HP in focus
HP (HPQ – Free report) is headquartered in Palo Alto and is located in the Computer and Technology sector. The stock has seen a price change of 11.79% since the beginning of the year. The personal computer and printer manufacturer currently pays a dividend of $ 0.19 per. Share with a yield of 2.82% compared to Computer – Mini-computer industry’s yield of 0.89% and S &P 500’s yield of 1.4%.
In terms of dividend growth, the company’s current annual dividend increased by $ 0.78 by 10.6% from last year. HP has increased its dividend 5 times on an annual basis over the last 5 years to an average annual increase of 8.95%. Future dividend growth depends on earnings growth as well as the payout ratio, which is the share of a company’s annual earnings per share. Share that it pays as dividend. HP’s current payout ratio is 31%, which means it paid out 31% of its subsequent 12-month EPS as dividends.
Looking at this fiscal year, HPQ expects solid earnings growth. Zacks Consensus Estimate for 2021 is $ 2.67 per. Share and earnings are expected to increase 17.11% from the previous year.
From greatly improving equity investments and reducing the overall portfolio risk to providing tax benefits, investors can suffer dividends for a variety of reasons. However, not all companies offer a quarterly payout.
Large, established companies that have more secure profits are often seen as the best dividend opportunities, but it is quite uncommon to see high-growth companies or tech startups offer their shareholders a dividend. Income investors need to be aware that high-yield stocks tend to struggle in periods of rising interest rates. That said, they can take comfort in the fact that HPQ is not only an attractive return but also a compelling investment opportunity with a Zacks rank of # 2 (Buy).
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