Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Hershey in Focus
Headquartered in Hershey, Hershey (HSY) is a Consumer Staples stock that has seen a price change of 5.99% so far this year. Currently paying a dividend of $1.37 per share, the company has a dividend yield of 2.77%. In comparison, the Food – Confectionery industry’s yield is 1.2%, while the S&P 500’s yield is 1.59%.
Taking a look at the company’s dividend growth, its current annualized dividend of $5.48 is up 23% from last year. In the past five-year period, Hershey has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.12%. 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. Hershey’s current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HSY expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $9.60 per share, with earnings expected to increase 0.10% from the year ago period.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, HSY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Hershey Company (The) (HSY) : Free Stock Analysis Report
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