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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
NiSource in Focus
NiSource (NI) is headquartered in Merrillville, and is in the Utilities sector. The stock has seen a price change of 6.86% since the start of the year. The energy holding company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 2.85%. This compares to the Utility - Electric Power industry's yield of 3.27% and the S&P 500's yield of 1.56%.
Looking at dividend growth, the company's current annualized dividend of $1.12 is up 5.7% from last year. Over the last 5 years, NiSource has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.17%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. NiSource's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NI expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.88 per share, which represents a year-over-year growth rate of 7.43%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that NI 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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NiSource, Inc (NI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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