When it comes to investing, many people dream of getting big returns from their financial portfolios. For income investors, the focus is on generating consistent cash flow from liquid investments such as stocks, bonds, ETFs, and other securities.
Cash flow can come from various sources like bond interest, dividends, and other types of investments. Dividends, in particular, are distributions of a company’s earnings paid out to shareholders. They are often measured by their dividend yield, which is a percentage of the current stock price. Studies have shown that dividends play a significant role in long-term returns, sometimes making up more than one-third of total returns.
One company in focus is Stifel Financial (SF), based in St. Louis and in the Finance sector. This year, the company’s shares have seen a price change of 18.35% and currently offer a dividend yield of 2.05%. Compared to the Financial – Investment Bank industry’s yield of 0.81% and the S&P 500’s yield of 1.6%, Stifel Financial stands out.
Stifel Financial has a track record of dividend growth, with an annualized dividend of $1.68, up 16.7% from last year. Over the past 5 years, the company has increased its dividend five times, with an average annual increase of 42.70%. Future dividend growth will depend on earnings growth and payout ratio, which currently stands at 35% for Stifel.
Analysts expect Stifel Financial’s earnings to expand this fiscal year, with a forecasted growth rate of 50.43%. While high-yielding stocks may struggle during periods of rising interest rates, Stifel Financial is seen as a compelling investment opportunity. Not only does it offer a strong dividend play, but it also holds a Zacks Rank of 3 (Hold).
Overall, dividends are attractive to investors for various reasons, including tax advantages and portfolio risk reduction. While high-growth companies may not offer dividends, established firms like Stifel Financial are considered reliable dividend options. Investors should be aware of the potential impact of rising interest rates on high-yielding stocks.