Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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.
Mondelez in Focus
Headquartered in Deerfield, Mondelez (MDLZ) is a Consumer Staples stock that has seen a price change of -5.37% so far this year. The maker of Oreo cookies, Cadbury chocolate and Trident gum is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.19% compared to the Food - Miscellaneous industry's yield of 0.3% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.14 is up 4.6% from last year. Mondelez has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 14.53%. 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. Mondelez's current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.
MDLZ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.55 per share, representing a year-over-year earnings growth rate of 3.24%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. 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, MDLZ 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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Mondelez International, Inc. (MDLZ) : Free Stock Analysis Report
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