All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Avery Dennison (AVY) is headquartered in Mentor, and is in the Industrial Products sector. The stock has seen a price change of 0.7% since the start of the year. The maker of office products is currently shelling out a dividend of $1.00 per share, with a dividend yield of 2.18%. This compares to the Containers - Paper and Packaging industry's yield of 2.35% and the S&P 500's yield of 1.32%.
Looking at dividend growth, the company's current annualized dividend of $4.00 is up 8.1% from last year. Over the last 5 years, Avery Dennison has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.44%. 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. Avery Dennison's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
AVY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $10.16 per share, which represents a year-over-year growth rate of 6.61%.
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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AVY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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