What is the dividend yield of a stock?

Dividend yield is a metric that measures the return shareholders receive, calculated as the company’s annual dividend per share expressed as a percentage of its current stock price. For example, if a stock pays a quarterly dividend of ¥0.05 per share—annualized to ¥0.20 per share—and its current price is ¥10 per share, the dividend yield is 2%. (¥0.05/share × 4) ÷ ¥10/share

A simple method for identifying companies capable of raising dividends

Another screening criterion is a total-debt-to-equity ratio no higher than 50%. The rationale is that, as interest rates rise, highly leveraged companies may struggle to maintain—and even more so, increase—their dividends. The screen also considers the dividend payout ratio: the percentage of total earnings paid out as dividends. Barron’s seeks companies with a payout ratio below 55%, a relatively conservative threshold that provides sufficient flexibility for future dividend growth. The table below lists the seven companies selected. All are S&P 500 constituents whose free cash flow yields exceed their dividend yields—indicating that their dividends are secure and have room to grow. Data as of July 29. PFG (Principal Financial Group), an asset management firm that assists clients with retirement investing, shows the largest spread between its free cash flow yield and dividend yield—16.6% versus 3.8%, respectively—as of the July 29 closing price. Including dividends, the stock has returned –6% year-to-date. By comparison, the S&P 500 is down 13%. Regions Financial (RF), a regional bank headquartered in Birmingham, Alabama, boasts a free cash flow yield near 14%, substantially higher than its recent dividend yield of 3.8%. Last month, Regions Financial announced plans to raise its quarterly dividend from $0.17 to $0.20 per share—a $0.03 increase, or nearly 18%. Two major global energy companies—ExxonMobil (XOM) and Chevron (CVX)—also made the list, both benefiting from rising oil and natural gas prices. Although questions arose early in the pandemic about whether ExxonMobil could sustain its dividend, the company ultimately raised its quarterly dividend by $0.01—to $0.88 per share—last fall. That move allowed it to remain in the S&P 500 Dividend Aristocrats Index, which includes only companies that have increased dividends for at least 25 consecutive years. On July 29, ExxonMobil reported second-quarter free cash flow of $16.9 billion—up from approximately $7 billion a year earlier—and paid $3.7 billion in dividends during the most recent quarter. Chevron reported second-quarter free cash flow of $10.6 billion—up from $5.2 billion a year earlier—with a quarterly dividend of $1.42 per share. Pharmaceutical giant Pfizer (PFE) also appears on the list. In the first half of this year, it paid $4.5 billion in dividends, with a quarterly dividend of $0.40 per share. In 2021, Pfizer’s free cash flow totaled $29.9 billion—up from $10.5 billion in 2019—and stood at approximately $6 billion in the first quarter of this year. Pfizer defines free cash flow under U.S. GAAP as net operating cash flow minus capital expenditures for property, plant, and equipment. Cisco Systems (CSCO) is the sole technology company on the list, with a free cash flow yield of 7.1%—more than double its dividend yield of 3.4%.

Stepan Company (SCL) Raises Quarterly Dividend to $0.405

4 days ago

Stepan Company has increased its quarterly cash dividend to $0.405 per share, marking its 59th consecutive year of dividend increases. This move reinforces the company's long-running dividend growth pattern and signals confidence in its financial stability.

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