Conagra Brands (CAG) could be a great choice – October 31, 2022
Achieving 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-oriented investor, your primary goal is to generate 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 that coveted distribution of a company’s earnings paid to shareholders, and investors often think of it by its dividend yield, a metric that measures the dividend as a percentage of the current share price. Many academic studies show that dividends are a large part of long-term returns, and in many cases dividend contributions exceed one-third of total returns.
Conagra brands in brief
Conagra Brands (GAC – Free Report) is headquartered in Chicago and is part of the consumer staples industry. The stock has seen a price change of 7.29% since the start of the year. The company currently pays a dividend of $0.33 per share, with a dividend yield of 3.6% compared to the Food Industry – Miscellaneous yield of 0.12% and the S&P 500 yield of 1.67 %.
Looking at the company’s dividend growth, its current annualized dividend of $1.32 is up 5.6% from a year ago. Over the past 5 years, Conagra Brands has increased its dividend 2 times on an annual basis for an average annual increase of 9.98%. Going forward, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. Conagra Brands’ current payout ratio is 54%, meaning it has paid out 54% of its 12-month EPS as a dividend.
CAG expects earnings to rise this fiscal year as well. The Zacks consensus estimate for 2022 is $2.43 per share, representing a year-over-year growth rate of 2.97%.
Investors love dividends for many reasons; they greatly improve the profits of equity investments, decrease the overall risk of the portfolio and offer tax advantages, among others. But not all companies offer a quarterly payment.
High-growth companies or tech start-ups, for example, rarely pay a dividend to their shareholders, while larger, more established companies with more secure earnings are often considered the best dividend options. Income-oriented investors should be aware that high yield stocks tend to struggle during periods of rising interest rates. With this in mind, CAG presents a compelling investment opportunity; it’s not only an attractive dividend play, but the stock also boasts a strong Zacks ranking of #2 (buy).