Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Old Republic International (ORI) is headquartered in Chicago, and is in the Finance sector. The stock has seen a price change of 20.37% since the start of the year. Currently paying a dividend of $0.26 per share, the company has a dividend yield of 3%. In comparison, the Insurance - Multi line industry's yield is 1.94%, while the S&P 500's yield is 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.06 is up 8.2% from last year. Over the last 5 years, Old Republic International has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.64%. 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. Right now, Old Republic's payout ratio is 37%, which means it paid out 37% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ORI expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $2.83 per share, which represents a year-over-year growth rate of 7.60%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. With that in mind, ORI presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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