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.
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.
SJW in Focus
Based in San Jose, SJW (SJW) is in the Utilities sector, and so far this year, shares have seen a price change of 12.48%. The parent of San Jose Water Co. Is paying out a dividend of $0.42 per share at the moment, with a dividend yield of 3.03% compared to the Utility - Water Supply industry's yield of 2.38% and the S&P 500's yield of 1.64%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.68 is up 5% from last year. Over the last 5 years, SJW has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.70%. 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. Right now, SJW's payout ratio is 54%, which means it paid out 54% of its trailing 12-month EPS as dividend.
SJW is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.96 per share, representing a year-over-year earnings growth rate of 0.34%.
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.
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. That said, they can take comfort from the fact that SJW is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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SJW Group (SJW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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