Are You Looking for a High-Growth Dividend Stock?

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Are You Looking for a High-Growth Dividend Stock?

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 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.

Cincinnati Financial in Focus

Based in Fairfield, Cincinnati Financial (CINF) is in the Finance sector, and so far this year, shares have seen a price change of 17.35%. The insurer is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 2.67% compared to the Insurance – Property and Casualty industry’s yield of 0.19% and the S&P 500’s yield of 1.57%.

Looking at dividend growth, the company’s current annualized dividend of $3.24 is up 8% from last year. In the past five-year *******, Cincinnati Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.96%. 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, Cincinnati Financial’s payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.

CINF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $6.32 per share, representing a year-over-year earnings growth rate of 4.81%.

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.

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, CINF 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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