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.
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.
Hawkins in Focus
Based in Roseville, Hawkins (HWKN) is in the Basic Materials sector, and so far this year, shares have seen a price change of 0.52%. Currently paying a dividend of $0.23 per share, the company has a dividend yield of 2.02%. In comparison, the Chemical - Specialty industry's yield is 0.42%, while the S&P 500's yield is 1.72%.
In terms of dividend growth, the company's current annualized dividend of $0.93 is up 0.8% from last year. Hawkins has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 3.52%. 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. Hawkins's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HWKN for this fiscal year. The Zacks Consensus Estimate for 2020 is $3.28 per share, representing a year-over-year earnings growth rate of 23.31%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HWKN 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Hawkins, Inc. (HWKN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research