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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 Detroit, DTE Energy (DTE) is in the Utilities sector, and so far this year, shares have seen a price change of 5.85%. The utility is currently shelling out a dividend of $1.09 per share, with a dividend yield of 3.41%. This compares to the Utility - Electric Power industry's yield of 3.28% and the S&P 500's yield of 1.54%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.36 is up 5.1% from last year. In the past five-year period, DTE Energy has increased its dividend 4 times on a year-over-year basis for an average annual increase of 0.17%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, DTE Energy's payout ratio is 56%, which means it paid out 56% of its trailing 12-month EPS as dividend.
DTE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $7.21 per share, representing a year-over-year earnings growth rate of 5.56%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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. With that in mind, DTE 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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