All investors love getting big returns from their portfolio, whether it’s through stocks, bonds, ETFs, or other types of securities. 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 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.
Luxfer in Focus
Based in Manchester, Luxfer (LXFR) is in the Industrial Products sector, and so far this year, shares have seen a price change of -12.64%. Currently paying a dividend of $0.13 per share, the company has a dividend yield of 3.08%. In comparison, the Manufacturing – General Industrial industry’s yield is 0.09%, while the S&P 500’s yield is 1.52%.
Taking a look at the company’s dividend growth, its current annualized dividend of $0.52 is up 4% from last year. In the past five-year period, Luxfer has increased its dividend 2 times on a year-over-year basis for an average annual increase of 7.13%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. Right now, Luxfer’s payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for LXFR for this fiscal year. The Zacks Consensus Estimate for 2022 is $1.44 per share, with earnings expected to increase 11.63% from the year ago period.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it’s fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 LXFR 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.