Investors want huge returns from stocks, bonds, ETFs, other products, or a mix of all. However, income investors focus on creating steady cash flow from their liquid investments.
Cash flow might come from bond interest or other investments, but income investors focus on dividends. Dividend yield, a percentage of the stock price, is a popular tool for investors to evaluate a company's dividend. Dividends often make up over one-third of long-term earnings, according to academic studies.
Toronto-based Sun Life (SLF) is in finance. Since January, the stock has moved 5.73%. The financial services firm pays a $0.58 per share dividend, yielding 4.24% compared to the Insurance - Life Insurance industry's 0.07% and the S&P 500's 1.58%.
The company's $2.32 annualized dividend is up 4.9% from previous year. Over the past five years, Sun Life has raised its dividend three times, averaging 9.76%
Future dividend growth depends on profits growth and the company's payout ratio, which is the percentage of annual earnings per share distributed as a dividend. Sun Life's dividend payout ratio is 48% of its trailing 12-month EPS.
For this fiscal year, SLF predicts strong earnings growth. The Zacks Consensus Estimate for 2024 is $5.09 per share, an 8.07% year-over-year increase.
Investors enjoy dividends because they boost stock gains, lower portfolio risk, and offer tax benefits. Remember that not all companies pay quarterly.
High-growth corporations or tech start-ups rarely pay dividends, while larger, more stable companies are frequently the greatest dividend options. Income investors must remember that high-yielding stocks struggle when interest rates rise.
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