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.
Kemper in Focus
Based in Chicago, Kemper (KMPR) is in the Finance sector, and so far this year, shares have seen a price change of -13.1%. The insurance holding company is paying out a dividend of $0.32 per share at the moment, with a dividend yield of 2.22% compared to the Insurance - Multi line industry's yield of 1.56% and the S&P 500's yield of 1.73%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.28 is up 3.2% from last year. Kemper has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 0.63%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Kemper's payout ratio is 21%, which means it paid out 21% of its trailing 12-month EPS as dividend.
KMPR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $6.03 per share, which represents a year-over-year growth rate of 2.38%.
Bottom Line
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 their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, KMPR 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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Kemper Corporation (KMPR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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