Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Virtus Investment Partners in Focus
Based in Hartford, Virtus Investment Partners (VRTS) is in the Finance sector, and so far this year, shares have seen a price change of 4.03%. The asset management company is currently shelling out a dividend of $0.67 per share, with a dividend yield of 2.12%. This compares to the Financial – Investment Management industry’s yield of 2.22% and the S&P 500’s yield of 1.83%.
Looking at dividend growth, the company’s current annualized dividend of $2.68 is up 15.5% from last year. In the past five-year period, Virtus Investment Partners has increased its dividend 2 times on a year-over-year basis for an average annual increase of 5.82%. 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. Virtus’s current payout ratio is 18%, meaning it paid out 18% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, VRTS expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $16.99 per share, which represents a year-over-year growth rate of 14.80%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, VRTS presents a compelling investment opportunity; it’s not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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