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 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.
Headquartered in Chicago, Exelon (EXC) is a Utilities stock that has seen a price change of 17.14% so far this year. The energy company is currently shelling out a dividend of $0.40 per share, with a dividend yield of 3.63%. This compares to the Utility - Electric Power industry's yield of 3.21% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $1.60 is up 5.3% from last year. Over the last 5 years, Exelon has increased its dividend 3 times on a year-over-year basis for an average annual increase of 0.70%. 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. Exelon's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EXC for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.69 per share, which represents a year-over-year growth rate of 7.60%.
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.
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 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 EXC 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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Exelon Corporation (EXC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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