Whether it is using stocks, ETFs, bonds or other types of investments, all investors love watching their portfolios get big returns. But when you are an income investor, your main focus is creating consistent cash flow from all of your liquid investments.
Cash flow comes from bond interest, interest from other kinds of investments, and of course, dividends. A dividend is a company distribution of its earnings given to shareholders; it is often seen as a dividend yield, a metric that determines a dividend as a percent of the company’s stock price. Many academic studies reveal that dividends are a significant portion of long-term returns, with dividends exceeding one-third of overall returns in many situations.
Sempra’s Dividend In Focus
Based in California, Sempra is in the Utilities industry, and so far this year, has seen a price shift of 3.89%. Currently giving a dividend of $1.1 a share, the firm features a dividend yield of 3.32%. In comparison, the average yield for its industry is 3%, while the S&P 500’s average yield is only 1.39%.
Looking at the dividend growth, the firm’s current annualized dividend of $4.40 is higher by 5.3% from last year. Sempra has grown its dividend 5 times on a y/y basis over the past 5 years for an average annual boost of 8.23%.
Looking to the future, the company’s dividend growth will be need earnings growth and a payout ratio, which is the amount of a company’s annual eps that it gives out as a dividend. Sempra’s payout ratio currently is 56%. This means it gave out 56% of its trailing 12-month EPS as a dividend.
The company is expecting earnings to increase this fiscal year too. With some estimates for 2021 expecting $8.13 a share, which means a year-over-year growth of 1.25%.
What’s The Bottom Line?
From greatly helping investing profits and lowering overall risks to giving tax advantages, investors love dividends for many different reasons. However, not all stocks give quarterly payouts.
With this in mind, Sempra is a great investment opportunity. It has a great dividend pay out and the stock is in a very stable industry.
Author: Scott Dowdy