Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Air Products and Chemicals (APD) is headquartered in Allentown, and is in the Basic Materials sector. The stock has seen a price change of 14.77% since the start of the year. Currently paying a dividend of $1.79 per share, the company has a dividend yield of 2.53%. In comparison, the Chemical - Diversified industry's yield is 1.69%, while the S&P 500's yield is 1.36%.
Looking at dividend growth, the company's current annualized dividend of $7.16 is up 0.6% from last year. Over the last 5 years, Air Products and Chemicals has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.01%. 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. Air Products and Chemicals's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, APD expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $13.01 per share, with earnings expected to increase 8.15% 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. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, APD 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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Air Products and Chemicals, Inc. (APD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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