Whether it’s through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you’re an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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
Based in Merrillville, NiSource (NI) is in the Utilities sector, and so far this year, shares have seen a price change of 29.91%. The energy holding company is paying out a dividend of $0.26 per share at the moment, with a dividend yield of 3.07% compared to the Utility – Electric Power industry’s yield of 3.28% and the S&P 500’s yield of 1.51%.
In terms of dividend growth, the company’s current annualized dividend of $1.06 is up 6% 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 6.06%. 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. NiSource’s current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
NI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $1.72 per share, with earnings expected to increase 7.50% from the year ago period.
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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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 Report
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