Why Chesapeake Utilities (CPK) is a Top Dividend Stock for Your Portfolio
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Dover, Chesapeake Utilities (CPK) is a Utilities stock that has seen a price change of 1.36% so far this year. Currently paying a dividend of $0.64 per share, the company has a dividend yield of 2.08%. In comparison, the Utility - Gas Distribution industry's yield is 3.32%, while the S&P 500's yield is 1.56%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.56 is up 2% from last year. In the past five-year period, Chesapeake Utilities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.63%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Chesapeake Utilities's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CPK expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $6.27 per share, which represents a year-over-year growth rate of 16.33%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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, CPK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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