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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Sun Life (SLF) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 4.77% since the start of the year. The financial services company is paying out a dividend of $0.64 per share at the moment, with a dividend yield of 4.1% compared to the Insurance - Life Insurance industry's yield of 1.76% and the S&P 500's yield of 1.53%.
Looking at dividend growth, the company's current annualized dividend of $2.55 is up 6.3% from last year. Over the last 5 years, Sun Life has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.94%. 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. Sun Life's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.
SLF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.27 per share, with earnings expected to increase 8.44% from the year ago period.
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.
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, SLF 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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Sun Life Financial Inc. (SLF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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