Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Reinsurance Group in Focus
Headquartered in Chesterfield, Reinsurance Group (RGA) is a Finance stock that has seen a price change of -19.3% so far this year. The reinsurance company is currently shelling out a dividend of $0.89 per share, with a dividend yield of 2.07%. This compares to the Insurance - Life Insurance industry's yield of 1.47% and the S&P 500's yield of 1.73%.
In terms of dividend growth, the company's current annualized dividend of $3.56 is up 2.3% from last year. In the past five-year period, Reinsurance Group has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.02%. 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. Reinsurance Group's current payout ratio is 16%. This means it paid out 16% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for RGA for this fiscal year. The Zacks Consensus Estimate for 2025 is $22.84 per share, representing a year-over-year earnings growth rate of 1.20%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, RGA 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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Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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