Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
NiSource in Focus
Based in Merrillville, NiSource (NI) is in the Utilities sector, and so far this year, shares have seen a price change of 8.57%. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.81%. In comparison, the Utility - Electric Power industry's yield is 3.33%, while the S&P 500's yield is 1.54%.
Taking a look at the company's dividend growth, its 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%. 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. NiSource's current payout ratio is 60%, meaning 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 a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. 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, NI 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NiSource, Inc (NI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
