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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 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.
Penske Automotive in Focus
Based in Bloomfield Hills, Penske Automotive (PAG - Free Report) is in the Retail-Wholesale sector, and so far this year, shares have seen a price change of 11.47%. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 2.7%. In comparison, the Automotive - Retail and Whole Sales industry's yield is 0.57%, while the S&P 500's yield is 1.78%.
Looking at 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%. 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. Penske's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PAG for this fiscal year. The Zacks Consensus Estimate for 2018 is $5.37 per share, representing a year-over-year earnings growth rate of 24.59%.
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.
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. 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).
We are reissuing this article to correct a mistake. The original article should no longer be relied upon.
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Is Penske Automotive (PAG) a Great Dividend Play?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Penske Automotive in Focus
Based in Bloomfield Hills, Penske Automotive (PAG - Free Report) is in the Retail-Wholesale sector, and so far this year, shares have seen a price change of 11.47%. Currently paying a dividend of $0.36 per share, the company has a dividend yield of 2.7%. In comparison, the Automotive - Retail and Whole Sales industry's yield is 0.57%, while the S&P 500's yield is 1.78%.
Looking at 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%. 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. Penske's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PAG for this fiscal year. The Zacks Consensus Estimate for 2018 is $5.37 per share, representing a year-over-year earnings growth rate of 24.59%.
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.
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. 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).
We are reissuing this article to correct a mistake. The original article should no longer be relied upon.