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.
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.
Unitil in Focus
Headquartered in Hampton, Unitil (UTL) is a Utilities stock that has seen a price change of -2.84% so far this year. Currently paying a dividend of $0.45 per share, the company has a dividend yield of 3.42%. In comparison, the Utility - Electric Power industry's yield is 3.35%, while the S&P 500's yield is 1.6%.
Looking at dividend growth, the company's current annualized dividend of $1.80 is up 5.9% from last year. In the past five-year period, Unitil has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.51%. 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. Right now, Unitil's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
UTL is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.08 per share, which represents a year-over-year growth rate of 3.70%.
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. 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. 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, UTL is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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
Unitil Corporation (UTL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
