Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Mosaic in Focus
Mosaic (MOS) is headquartered in Tampa, and is in the Basic Materials sector. The stock has seen a price change of 5% since the start of the year. The fertilizer maker is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 3.41% compared to the Fertilizers industry's yield of 2.99% and the S&P 500's yield of 1.68%.
Looking at dividend growth, the company's current annualized dividend of $0.88 is up 4.8% from last year. In the past five-year period, Mosaic has increased its dividend 3 times on a year-over-year basis for an average annual increase of 45.27%. 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, Mosaic's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MOS for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.12 per share, representing a year-over-year earnings growth rate of 7.07%.
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. It's important to keep in mind that not all companies provide 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. 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, MOS 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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The Mosaic Company (MOS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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