Why MGIC Investment (MTG) is a Top Dividend Stock for Your Portfolio
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.
MGIC Investment (MTG) is headquartered in Milwaukee, and is in the Finance sector. The stock has seen a price change of 9.11% since the start of the year. The mortgage insurance company is paying out a dividend of $0.13 per share at the moment, with a dividend yield of 2.01% compared to the Insurance - Multi line industry's yield of 1.8% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $0.52 is up 6.1% from last year. Over the last 5 years, MGIC Investment has increased its dividend 4 times on a year-over-year basis for an average annual increase of 20.17%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. MGIC's current payout ratio is 17%, meaning it paid out 17% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MTG for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.92 per share, with earnings expected to increase 0.34% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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, MTG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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