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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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Avient in Focus
Based in Avon Lake, Avient (AVNT) is in the Basic Materials sector, and so far this year, shares have seen a price change of 17.78%. Currently paying a dividend of $0.26 per share, the company has a dividend yield of 2.1%. In comparison, the Chemical - Diversified industry's yield is 1.82%, while the S&P 500's yield is 1.54%.
Looking at dividend growth, the company's current annualized dividend of $1.03 is up 3% from last year. In the past five-year period, Avient has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.28%. 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. Avient's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
AVNT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $2.64 per share, which represents a year-over-year growth rate of 11.86%.
Bottom Line
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AVNT 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).