CenterPoint Energy (CNP) Could Be a Great Choice

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.

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 Houston, CenterPoint Energy (CNP) is in the Utilities sector, and so far this year, shares have seen a price change of 23.67%. Currently paying a dividend of $0.22 per share, the company has a dividend yield of 2.24%. In comparison, the Utility - Electric Power industry's yield is 3.12%, while the S&P 500's yield is 1.52%.

Looking at dividend growth, the company's current annualized dividend of $0.88 is up 8.6% 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 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.

CNP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.76 per share, with earnings expected to increase 8.64% 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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 CNP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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