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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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
China Petro&Chm in Focus
Headquartered in Beijing, China Petro&Chm (SNP) is an Oils-Energy stock that has seen a price change of 7.62% so far this year. The energy and chemical company is currently shelling out a dividend of $1.8 per share, with a dividend yield of 9.19%. This compares to the Oil and Gas - Integrated - Emerging Markets industry's yield of 5.57% and the S&P 500's yield of 1.4%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.41 is up 4.8% from last year. In the past five-year period, China Petro&Chm has increased its dividend 1 times on a year-over-year basis for an average annual increase of 14.15%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. China Petro&Chm's current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.
SNP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $8.92 per share, representing a year-over-year earnings growth rate of 115.98%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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, SNP 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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China Petroleum & Chemical Corporation (SNP) : Free Stock Analysis Report
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