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Why Ryder (R) is a Great Dividend Stock Right Now

Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Ryder (R) have what it takes? Let's find...

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This story originally appeared on Zacks

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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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.

Ryder in Focus

Based in Miami, Ryder (R) is in the Transportation sector, and so far this year, shares have seen a price change of 47.73%. The truck leasing company is currently shelling out a dividend of $0.58 per share, with a dividend yield of 2.54%. This compares to the Transportation - Equipment and Leasing industry's yield of 0.26% and the S&P 500's yield of 1.35%.

Looking at dividend growth, the company's current annualized dividend of $2.32 is up 3.6% from last year. In the past five-year period, Ryder has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.93%. 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. Ryder's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, R expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $7.58 per share, with earnings expected to increase 2,907.41% from the year ago period.

Bottom Line

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.

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 must be conscious 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 R 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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