Why Gerdau (GGB) is a Great Dividend Stock Right Now

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Gerdau (GGB) is headquartered in Sao Paulo Sp, and is in the Basic Materials sector. The stock has seen a price change of 17.34% since the start of the year. The steel producer is currently shelling out a dividend of $0.04 per share, with a dividend yield of 3.5%. This compares to the Steel - Producers industry's yield of 0.65% and the S&P 500's yield of 1.35%.

Looking at dividend growth, the company's current annualized dividend of $0.15 is up 47.1% from last year. Over the last 5 years, Gerdau has increased its dividend 3 times on a year-over-year basis for an average annual increase of 17.92%. 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. Gerdau's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, GGB expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $0.53 per share, which represents a year-over-year growth rate of 82.76%.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, GGB 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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This article originally published on Zacks Investment Research (zacks.com).

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