Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Sonoco in Focus

Sonoco (SON) is headquartered in Hartsville, and is in the Industrial Products sector. The stock has seen a price change of -3.21% since the start of the year. The packaging maker is currently shelling out a dividend of $0.52 per share, with a dividend yield of 4.4%. This compares to the Containers - Paper and Packaging industry's yield of 2.34% and the S&P 500's yield of 1.55%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.08 is up 0.5% from last year. Over the last 5 years, Sonoco has increased its dividend 4 times on a year-over-year basis for an average annual increase of 4.92%. 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, Sonoco's payout ratio is 41%, which means it paid out 41% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for SON for this fiscal year. The Zacks Consensus Estimate for 2025 is $6.03 per share, with earnings expected to increase 42.89% 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. However, not all companies offer 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. 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 SON is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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Sonoco Products Company (SON) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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