Middlesex Water (MSEX) 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 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.

Middlesex Water in Focus

Middlesex Water (MSEX) is headquartered in Iselin, and is in the Utilities sector. The stock has seen a price change of 9.96% since the start of the year. The water utility is currently shelling out a dividend of $0.34 per share, with a dividend yield of 2.35%. This compares to the Utility - Water Supply industry's yield of 2.46% and the S&P 500's yield of 1.56%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.36 is up 3.4% from last year. In the past five-year period, Middlesex Water has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.15%. 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. Middlesex Water's current payout ratio is 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for MSEX for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.53 per share, which represents a year-over-year growth rate of 2.43%.

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. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that MSEX 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