Are You Looking for a High-Growth Dividend Stock?

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.

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.

Headquartered in Milwaukee, MGIC Investment (MTG) is a Finance stock that has seen a price change of 19.74% so far this year. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 2.11%. In comparison, the Insurance - Multi line industry's yield is 1.65%, while the S&P 500's yield is 1.54%.

Looking at dividend growth, the company's current annualized dividend of $0.60 is up 22.4% from last year. Over the last 5 years, MGIC Investment has increased its dividend 4 times on a year-over-year basis for an average annual increase of 20.17%. 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. MGIC's current payout ratio is 17%, meaning it paid out 17% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for MTG for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.01 per share, representing a year-over-year earnings growth rate of 3.44%.

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MTG 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).

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This article originally published on Zacks Investment Research (zacks.com).

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