Entergy (ETR) 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. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

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 New Orleans, Entergy (ETR) is in the Utilities sector, and so far this year, shares have seen a price change of 27.38%. Currently paying a dividend of $0.60 per share, the company has a dividend yield of 2.48%. In comparison, the Utility - Electric Power industry's yield is 3.02%, while the S&P 500's yield is 1.49%.

Looking at dividend growth, the company's current annualized dividend of $2.40 is up 4.6% from last year. Over the last 5 years, Entergy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.80%. 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. Entergy's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ETR expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.90 per share, which represents a year-over-year growth rate of 6.85%.

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 its 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 ETR is not only an attractive dividend play, but is also 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).

Zacks Investment Research

Source Zacks-com