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Eaton Vance Averages 17% Annual Dividend Hike

Eaton Vance Averages 17% Annual Dividend Hike
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Friday, 17 May 2019 12:38 PM Current | Bio | Archive

Perhaps the most attractive aspect of owning dividend growth stocks is that they can offer investors a steadily rising stream of income over time, with lower volatility than the broader stock market.

For example, Eaton Vance (EV) has increased its dividend for 38 years in a row. It has increased its dividend by 17% per year, on average, over the course of those 38 years.

Not only does Eaton Vance have a highly impressive history of dividend growth, it also has a high current yield of 3.6%. A high dividend yield combined with strong dividend growth makes Eaton Vance one of the best dividend stocks right now.

Business Overview

Eaton Vance operates in the asset management industry. Eaton Vance offers clients a variety of investment products, including closed-end funds, mutual funds, term trusts, and exchange-traded funds under the NextShares brand. Eaton Vance is a significant player in the asset management business, with quarter ending assets under management (AUM) of $445 billion. Eaton Vance has a balanced AUM profile consisting of equity, fixed income, floating-rate income, alternative investments, and more.

The stock market decline in the 2018 fourth quarter was challenging for asset management firms, which rely heavily on AUM growth to generate higher revenue and earnings. While market conditions improved to start 2019, Eaton Vance had a weak performance in the first quarter. Revenue of $406 million declined 3% from the 2018 first quarter, while adjusted EPS declined by 6%.

As global stock markets have continued to rise and economic growth remains positive, the mild declines in the first quarter should reverse over the course of 2019. Eaton Vance also enjoys a strong brand and a top reputation in the asset management industry. These qualities help the company continue to grow AUM, even in difficult climates. Eaton Vance actually saw net inflows of $11.7 billion through the last four quarters.

Assuming the global economy does not enter a recession, Eaton Vance has a positive earnings growth trajectory over the next several years. Annualized earnings growth of ~7% per year is a reasonable expectation for Eaton Vance investors. Strong earnings growth will allow the company to continue rewarding shareholders with rising dividends.

Attractive Income and Growth Stock

Eaton Vance currently pays a quarterly dividend of $0.35 per share, equaling an annual payout of $1.40 per share. The stock has a current dividend yield of 3.6%, which is significantly above the average dividend yield of the broader S&P 500 Index (~2%). In addition, Eaton Vance is a high dividend growth stock.

The company’s most recent increase was a 13% increase in October 2018. With an expected dividend payout ratio of 42% for 2019, Eaton Vance easily has the financial flexibility to provide another strong dividend raise later this year.

The combination of earnings growth and dividends could lead to double-digit total returns each year, making the stock appealing to investors concerned with total returns.

The stock is highly attractive for income seekers as well, with a dividend yield almost twice the average S&P 500 yield, and a long history of high dividend raises.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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BenReynolds
Perhaps the most attractive aspect of owning dividend growth stocks is that they can offer investors a steadily rising stream of income over time, with lower volatility than the broader stock market.
eaton vance, high, returns, dividend, growth, stock
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2019-38-17
Friday, 17 May 2019 12:38 PM
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