Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Exelon (EXC) is headquartered in Chicago, and is in the Utilities sector. The stock has seen a price change of 14.24% since the start of the year. The energy company is paying out a dividend of $0.40 per share at the moment, with a dividend yield of 3.72% compared to the Utility - Electric Power industry's yield of 3.3% and the S&P 500's yield of 1.53%.
Looking at dividend growth, the company's current annualized dividend of $1.60 is up 5.3% from last year. Over the last 5 years, Exelon has increased its dividend 3 times on a year-over-year basis for an average annual increase of 0.70%. 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. Exelon's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EXC for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.70 per share, which represents a year-over-year growth rate of 8.00%.
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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EXC 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).
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Exelon Corporation (EXC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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