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Why Eastman Chemical (EMN) 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. However, when you're an income investor, your primary focus is generating 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 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.

Eastman Chemical in Focus

Eastman Chemical (EMN) is headquartered in Kingsport, and is in the Basic Materials sector. The stock has seen a price change of 15.23% since the start of the year. Currently paying a dividend of $0.81 per share, the company has a dividend yield of 3.13%. In comparison, the Chemical - Diversified industry's yield is 1.71%, while the S&P 500's yield is 1.59%.

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Taking a look at the company's dividend growth, its current annualized dividend of $3.24 is up 1.9% from last year. Over the last 5 years, Eastman Chemical has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.14%. 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. Right now, Eastman Chemical's payout ratio is 51%, which means it paid out 51% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for EMN for this fiscal year. The Zacks Consensus Estimate for 2024 is $7.75 per share, which represents a year-over-year growth rate of 21.09%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EMN 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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