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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 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.
NRG Energy in Focus
Headquartered in Houston, NRG Energy (NRG - Free Report) is a Utilities stock that has seen a price change of 21.81% so far this year. Currently paying a dividend of $0.38 per share, the company has a dividend yield of 3.9%. In comparison, the Utility - Electric Power industry's yield is 3.7%, while the S&P 500's yield is 1.67%.
In terms of dividend growth, the company's current annualized dividend of $1.51 is up 7.9% from last year. NRG Energy has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 88.27%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. NRG's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NRG for this fiscal year. The Zacks Consensus Estimate for 2023 is $4.55 per share, with earnings expected to increase 73.66% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, NRG 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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NRG Energy (NRG) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 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.
NRG Energy in Focus
Headquartered in Houston, NRG Energy (NRG - Free Report) is a Utilities stock that has seen a price change of 21.81% so far this year. Currently paying a dividend of $0.38 per share, the company has a dividend yield of 3.9%. In comparison, the Utility - Electric Power industry's yield is 3.7%, while the S&P 500's yield is 1.67%.
In terms of dividend growth, the company's current annualized dividend of $1.51 is up 7.9% from last year. NRG Energy has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 88.27%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. NRG's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for NRG for this fiscal year. The Zacks Consensus Estimate for 2023 is $4.55 per share, with earnings expected to increase 73.66% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, NRG 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).