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Eastman Chemical (EMN) is a Top Dividend Stock Right Now: Should You Buy?

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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. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Eastman Chemical in Focus

Based in Kingsport, Eastman Chemical (EMN - Free Report) is in the Basic Materials sector, and so far this year, shares have seen a price change of 11.59%. The specialty chemicals maker is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 3.23% compared to the Chemical - Diversified industry's yield of 1.8% and the S&P 500's yield of 1.57%.

Looking at dividend growth, the company's current annualized dividend of $3.24 is up 1.9% from last year. In the past five-year period, Eastman Chemical has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.14%. 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. Right now, Eastman Chemical's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for EMN for this fiscal year. The Zacks Consensus Estimate for 2024 is $7.75 per share, representing a year-over-year earnings growth rate of 21.09%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EMN 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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