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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Headquartered in Rome Italy, Eni SpA (E) is an Oils-Energy stock that has seen a price change of 13.82% so far this year. The energy company is currently shelling out a dividend of $0.35 per share, with a dividend yield of 4.74%. This compares to the Oil and Gas - Integrated - International industry's yield of 1.36% and the S&P 500's yield of 1.57%.
In terms of dividend growth, the company's current annualized dividend of $1.48 is up 2.1% from last year. Over the last 5 years, Eni SpA has increased its dividend 2 times on a year-over-year basis for an average annual increase of 20.12%. 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. Eni SpA's current payout ratio is 41%, meaning it paid out 41% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, E expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.61 per share, which represents a year-over-year growth rate of 4.03%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, E 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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This article originally published on Zacks Investment Research (zacks.com).
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