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.
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 Toronto, Sun Life (SLF) is a Finance stock that has seen a price change of 17.11% so far this year. Currently paying a dividend of $0.68 per share, the company has a dividend yield of 3.7%. In comparison, the Insurance - Life Insurance industry's yield is 0.88%, while the S&P 500's yield is 1.42%.
Looking at dividend growth, the company's current annualized dividend of $2.70 is up 7.8% from last year. Over the last 5 years, Sun Life has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.94%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Sun Life's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.
SLF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $5.74 per share, with earnings expected to increase 7.69% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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, SLF 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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Sun Life Financial Inc. (SLF): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).