Chesapeake Utilities (CPK) Could Be a Great Choice

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Chesapeake Utilities in Focus

Headquartered in Dover, Chesapeake Utilities (CPK) is a Utilities stock that has seen a price change of 4.52% so far this year. Currently paying a dividend of $0.64 per share, the company has a dividend yield of 2.02%. In comparison, the Utility - Gas Distribution industry's yield is 3.36%, while the S&P 500's yield is 1.59%.

Looking at dividend growth, the company's current annualized dividend of $2.56 is up 2% from last year. In the past five-year period, Chesapeake Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.63%. 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, Chesapeake Utilities's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CPK for this fiscal year. The Zacks Consensus Estimate for 2025 is $6.25 per share, representing a year-over-year earnings growth rate of 15.96%.

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. With that in mind, CPK 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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This article originally published on Zacks Investment Research (zacks.com).

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