This is why Radian (RDN) is a great dividend-paying stock

gGetting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all of them, is an investor’s dream. However, when you are an income investor, your main 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 profits paid to shareholders, and investors often view it by its dividend yield, a measure that measures the dividend as a percentage of the current stock price. Numerous 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.

Radian in focus

Philadelphia-based Radian (RDN) is a financial stock that has seen a 15.16% price change so far this year. The mortgage insurer currently pays a dividend of $ 0.14 per share, with a dividend yield of 2.4%. This compares to the insurance industry’s return – multi-line of 1.77% and the return of the S&P 500 of 1.4%.

In terms of dividend growth, the company’s current annualized dividend of $ 0.56 is up 12% from last year. Over the past five years, Radian has increased its dividend twice year over year for an average annual increase of 195.33%. Future dividend growth will depend on earnings growth as well as the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as dividends. Right now, Radian’s payout ratio is 21%, which means he’s paid 21% of his past 12-month EPS as a dividend.

RDN also expects an increase in profits during this fiscal year. Zacks’ consensus estimate for 2021 is $ 2.84 per share, which represents a year-over-year growth rate of 63.22%.

Final result

Whether it’s dramatically improving earnings from equity investments and reducing overall portfolio risk or offering tax benefits, investors love dividends for a variety of reasons. However, not all companies offer quarterly payment.

High-growth companies or tech start-ups, for example, rarely pay their shareholders a dividend, while larger, more established companies with safer earnings are often seen as the best dividend options. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. That said, they can be reassured that RDN is not only an attractive dividend game, but is also a compelling investment opportunity with a Zacks ranking of # 1 (strong buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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