Why Gerdau (GGB) 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

Headquartered in Sao Paulo Sp, Gerdau (GGB) is a Basic Materials stock that has seen a price change of 36.58% so far this year. The steel producer is paying out a dividend of $0.03 per share at the moment, with a dividend yield of 2.28% compared to the Steel - Producers industry's yield of 0.65% and the S&P 500's yield of 1.3%.

Looking at dividend growth, the company's current annualized dividend of $0.12 is up 17.6% 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 17%, meaning it paid out 17% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for GGB for this fiscal year. The Zacks Consensus Estimate for 2026 is $0.53 per share, representing a year-over-year earnings growth rate of 82.76%.

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers its 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, 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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