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Is Penske Automotive (PAG) a Good Pick for Income Investors?
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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Penske Automotive in Focus
Penske Automotive (PAG - Free Report) is headquartered in Bloomfield Hills, and is in the Retail-Wholesale sector. The stock has seen a price change of 4.87% since the start of the year. The auto dealership chain is currently shelling out a dividend of $0.71 per share, with a dividend yield of 2.87%. This compares to the Automotive - Retail and Whole Sales industry's yield of 0.55% and the S&P 500's yield of 1.82%.
In terms of dividend growth, the company's current annualized dividend of $1.44 is up 14.3% from last year. In the past five-year period, Penske Automotive has increased its dividend 5 times on a year-over-year basis for an average annual increase of 17.59%. 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. Penske's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PAG expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $5.34 per share, with earnings expected to increase 23.90% 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. 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. That said, they can take comfort from the fact that PAG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Is Penske Automotive (PAG) a Good Pick for Income Investors?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Penske Automotive in Focus
Penske Automotive (PAG - Free Report) is headquartered in Bloomfield Hills, and is in the Retail-Wholesale sector. The stock has seen a price change of 4.87% since the start of the year. The auto dealership chain is currently shelling out a dividend of $0.71 per share, with a dividend yield of 2.87%. This compares to the Automotive - Retail and Whole Sales industry's yield of 0.55% and the S&P 500's yield of 1.82%.
In terms of dividend growth, the company's current annualized dividend of $1.44 is up 14.3% from last year. In the past five-year period, Penske Automotive has increased its dividend 5 times on a year-over-year basis for an average annual increase of 17.59%. 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. Penske's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, PAG expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $5.34 per share, with earnings expected to increase 23.90% 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. 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. That said, they can take comfort from the fact that PAG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).