All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Sumitomo Mitsui in Focus
Headquartered in Tokyo, Sumitomo Mitsui (SMFG) is a Finance stock that has seen a price change of 10.53% so far this year. The bank is paying out a dividend of $0.15 per share at the moment, with a dividend yield of 4.5% compared to the Banks - Foreign industry's yield of 3.05% and the S&P 500's yield of 1.29%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.31 is up 8% from last year. Over the last 5 years, Sumitomo Mitsui has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.61%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Sumitomo Mitsui's payout ratio is 31%, which means it paid out 31% of its trailing 12-month EPS as dividend.
SMFG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $0.90 per share, which represents a year-over-year growth rate of 18.42%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SMFG 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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Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report
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