Why Essential Utilities (WTRG) is a great dividend right now
AAll investors love to earn big returns from their portfolio, whether through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary goal.
Cash flow can come from interest on bonds, interest from other types of investments and, of course, dividends. A dividend is the coveted distribution of a company’s profits paid to shareholders, and investors often perceive it through its dividend yield, a measure that measures the dividend as a percentage of the current stock price. Numerous academic studies show that dividends are a large part of long-term returns, and in many cases dividend contributions exceed one-third of total returns.
Essential utilities at a glance
Based in Bryn Mawr, Essential Utilities (WTRG) is in the utilities business, and so far this year the stocks have seen a 0.63% price change. The water utility is currently paying a dividend of $ 0.25 per share, with a dividend yield of 2.11%. This compares to the Utilities Industry – Water Supply performance of 1.59% and the S&P 500 performance of 1.3%.
In terms of dividend growth, the company’s current annualized dividend of $ 1 is up 3.1% from last year. Over the past 5 years, Essential Utilities has increased its dividend 5 times on an annual basis for an average annual increase of 7.07%. Future dividend growth will depend on earnings growth as well as the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. Essential Utilities’ current payout ratio is 59%, which means it has paid 59% of its 12-month EPS as a dividend.
WTRG expects its profits to increase in this fiscal year as well. Zacks’ consensus estimate for 2021 is $ 1.67 per share, with earnings expected to rise 5.70% from a year ago.
At the end of the line
Whether it’s dramatically improving profits from investing in stocks and reducing overall portfolio risk or offering tax benefits, investors love dividends for a variety of reasons. It’s important to keep in mind that not all companies offer quarterly payouts.
High-growth companies or tech start-ups, for example, rarely deliver a dividend to their shareholders, while larger, more established companies that make safer profits are often seen as the best dividend options. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. With that in mind, WTRG is a compelling investment opportunity. Not only is it a strong dividend game, but the title currently sits at a Zacks rank of 3 (Hold).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.