Why Otter Tail (OTTR) is a Top Dividend Stock for Your Portfolio
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Otter Tail (OTTR) have what it...
All investors love getting big returns from their portfolio, whether it's 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Otter Tail in Focus
Otter Tail (OTTR) is headquartered in Fergus Falls, and is in the Utilities sector. The stock has seen a price change of 24.2% since the start of the year. The power company and manufacturer is currently shelling out a dividend of $0.39 per share, with a dividend yield of 2.95%. This compares to the Utility - Electric Power industry's yield of 3.15% and the S&P 500's yield of 1.36%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.56 is up 5.4% from last year. Otter Tail has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.82%. 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. Otter Tail's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
OTTR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $3.55 per share, with earnings expected to increase 51.71% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that OTTR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Otter Tail Corporation (OTTR): Free Stock Analysis Report
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