All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Based in Houston, CenterPoint Energy (CNP) is in the Utilities sector, and so far this year, shares have seen a price change of 22.31%. The energy delivery company is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 2.27% compared to the Utility - Electric Power industry's yield of 3.24% and the S&P 500's yield of 1.49%.
Looking at dividend growth, the company's current annualized dividend of $0.88 is up 8.6% from last year. Over the last 5 years, CenterPoint Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.33%. 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. CenterPoint's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
CNP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.75 per share, which represents a year-over-year growth rate of 8.02%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CNP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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CenterPoint Energy, Inc. (CNP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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