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 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.
Exelon (EXC) is headquartered in Chicago, and is in the Utilities sector. The stock has seen a price change of 25.88% since the start of the year. The energy company is paying out a dividend of $0.40 per share at the moment, with a dividend yield of 3.38% compared to the Utility - Electric Power industry's yield of 3.08% and the S&P 500's yield of 1.48%.
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.
Looking at this fiscal year, EXC expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.69 per share, with earnings expected to increase 7.60% from the year ago period.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EXC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong 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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