Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Sumitomo Mitsui in Focus
Based in Tokyo, Sumitomo Mitsui (SMFG) is in the Finance sector, and so far this year, shares have seen a price change of 10.86%. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 4.48%. In comparison, the Banks - Foreign industry's yield is 2.4%, while the S&P 500's yield is 1.36%.
In terms of dividend growth, the company's current annualized dividend of $0.31 is up 8% from last year. Sumitomo Mitsui has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 5.15%. 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. Sumitomo Mitsui's current payout ratio is 31%, meaning 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, representing a year-over-year earnings growth rate of 18.42%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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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