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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
CenterPoint Energy in Focus
CenterPoint Energy (CNP) is headquartered in Houston, and is in the Utilities sector. The stock has seen a price change of 15.54% since the start of the year. The energy delivery company is currently shelling out a dividend of $0.22 per share, with a dividend yield of 2.4%. This compares to the Utility - Electric Power industry's yield of 3.15% and the S&P 500's yield of 1.54%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.88 is up 8.6% from last year. CenterPoint Energy has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.25%. 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. CenterPoint's current payout ratio is 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CNP for this fiscal year. The Zacks Consensus Estimate for 2025 is $1.75 per share, which represents a year-over-year growth rate of 8.02%.
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. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CNP 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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CenterPoint Energy, Inc. (CNP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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