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.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
CenterPoint Energy (CNP) is headquartered in Houston, and is in the Utilities sector. The stock has seen a price change of 10.98% since the start of the year. The energy delivery company is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.16% compared to the Utility - Electric Power industry's yield of 2.98% and the S&P 500's yield of 1.44%.
Looking at dividend growth, the company's current annualized dividend of $0.92 is up 4.5% from last year. Over the last 5 years, CenterPoint Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.33%. 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. CenterPoint's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CNP expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $1.91 per share, with earnings expected to increase 8.52% 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. It's important to keep in mind that not all companies provide 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, CNP 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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CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).