Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, 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.
Essential Utilities (WTRG) is headquartered in Bryn Mawr, and is in the Utilities sector. The stock has seen a price change of 2.42% since the start of the year. Currently paying a dividend of $0.33 per share, the company has a dividend yield of 3.5%. In comparison, the Utility - Water Supply industry's yield is 2.64%, while the S&P 500's yield is 1.48%.
Looking at dividend growth, the company's current annualized dividend of $1.30 is up 2.8% from last year. Over the last 5 years, Essential Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.53%. 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. Essential Utilities's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for WTRG for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.10 per share, representing a year-over-year earnings growth rate of 6.60%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, WTRG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Essential Utilities Inc. (WTRG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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