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.
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.
Headquartered in Toronto, Sun Life (SLF) is a Finance stock that has seen a price change of -4.15% so far this year. The financial services company is paying out a dividend of $0.64 per share at the moment, with a dividend yield of 4.49% compared to the Insurance - Life Insurance industry's yield of 1.61% and the S&P 500's yield of 1.51%.
Looking at dividend growth, the company's current annualized dividend of $2.55 is up 6.3% from last year. Over the last 5 years, Sun Life has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.94%. 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. Sun Life's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
SLF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.34 per share, which represents a year-over-year growth rate of 9.88%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that SLF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Sun Life Financial Inc. (SLF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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