Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all of them, is an investor’s dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary goal.
Cash flow can come from bond interest, interest from other types of investments and, of course, dividends. A dividend is the coveted distribution of a company’s profits paid to shareholders, and investors often view it by its dividend yield, a measure that measures the dividend as a percentage of the current stock price. Numerous academic studies show that dividends are a large part of long-term returns, and in many cases dividend contributions exceed one-third of total returns.
MDU resources at a glance
Based at Bismarck, MDU Resources (ULM – Free Report) is in the utilities sector, and so far this year the stocks have seen a price change of 11.92%. Currently paying a dividend of $ 0.21 per share, the company has a dividend yield of 2.88%. In comparison, the performance of the utility industry – gas distribution is 3.03%, while the return of the S&P 500 is 1.41%.
Looking at the company’s dividend growth, its current annualized dividend of $ 0.85 is up 1.8% from a year ago. Over the past five years, MDU Resources has increased its dividend 5 times year over year for an average annual increase of 2.54%. Any future dividend growth will depend on both earnings growth and the payout ratio of the company; a payout ratio is the proportion of a company’s annual earnings per share that it pays out as a dividend. MDU Resources’ current payout rate is 41%. This means that he paid 41% of his 12-month EPS as a dividend.
Looking at this fiscal year, MDU expects solid earnings growth. Zacks’ consensus estimate for 2021 is $ 2.12 per share, which represents a year-over-year growth rate of 8.72%.
Investors love dividends for a variety of reasons, ranging from tax benefits and lower overall portfolio risk to dramatically improving earnings from equity investments. However, not all companies offer quarterly payment.
High growth companies or tech start-ups, for example, rarely pay a dividend to their shareholders, while larger, more established companies with safer earnings are often seen as the best dividend options. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. With that in mind, MDU is a compelling investment opportunity. Not only is this a big dividend game, the stock currently sits at Zacks rank of 3 (Hold).