All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Based in Chicago, Exelon (EXC) is in the Utilities sector, and so far this year, shares have seen a price change of 13.42%. Currently paying a dividend of $0.42 per share, the company has a dividend yield of 3.4%. In comparison, the Utility - Electric Power industry's yield is 2.88%, while the S&P 500's yield is 1.4%.
Looking at dividend growth, the company's current annualized dividend of $1.68 is up 5% from last year. Over the last 5 years, Exelon has increased its dividend 3 times on a year-over-year basis for an average annual increase of 0.70%. 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. Exelon's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EXC expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $2.85 per share, with earnings expected to increase 2.89% 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. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its 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. That said, they can take comfort from the fact that EXC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
Zacks Names #1 Semiconductor Stock
This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.
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Exelon Corporation (EXC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).