Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Progressive in Focus
Progressive (PGR) is headquartered in Mayfield Village, and is in the Finance sector. The stock has seen a price change of 9.45% since the start of the year. The insurer is paying out a dividend of $2.51 per share at the moment, with a dividend yield of 3.81% compared to the Insurance - Property and Casualty industry's yield of 1.6% and the S&P 500's yield of 1.97%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.51 is up 123.1% from last year. Over the last 5 years, Progressive has increased its dividend 4 times on a year-over-year basis for an average annual increase of 17.12%. 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. Right now, Progressive's payout ratio is 25%, which means it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PGR for this fiscal year. The Zacks Consensus Estimate for 2019 is $5.01 per share, representing a year-over-year earnings growth rate of 13.35%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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, PGR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
The Progressive Corporation (NYSE:PGR): Free Stock Analysis Report
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