We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
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.
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.
Illinois Tool Works in Focus
Headquartered in Glenview, Illinois Tool Works (ITW - Free Report) is an Industrial Products stock that has seen a price change of 9.1% so far this year. Currently paying a dividend of $1.31 per share, the company has a dividend yield of 2.18%. In comparison, the Manufacturing - General Industrial industry's yield is 0.07%, while the S&P 500's yield is 1.58%.
In terms of dividend growth, the company's current annualized dividend of $5.24 is up 3.6% from last year. Over the last 5 years, Illinois Tool Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.19%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Illinois Tool Works's current payout ratio is 57%. This means it paid out 57% of its trailing 12-month EPS as dividend.
ITW is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $9.56 per share, with earnings expected to increase 4.25% from the year ago period.
Bottom Line
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.
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. That said, they can take comfort from the fact that ITW is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Are You Looking for a High-Growth Dividend Stock?
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.
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.
Illinois Tool Works in Focus
Headquartered in Glenview, Illinois Tool Works (ITW - Free Report) is an Industrial Products stock that has seen a price change of 9.1% so far this year. Currently paying a dividend of $1.31 per share, the company has a dividend yield of 2.18%. In comparison, the Manufacturing - General Industrial industry's yield is 0.07%, while the S&P 500's yield is 1.58%.
In terms of dividend growth, the company's current annualized dividend of $5.24 is up 3.6% from last year. Over the last 5 years, Illinois Tool Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.19%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Illinois Tool Works's current payout ratio is 57%. This means it paid out 57% of its trailing 12-month EPS as dividend.
ITW is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $9.56 per share, with earnings expected to increase 4.25% from the year ago period.
Bottom Line
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.
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. That said, they can take comfort from the fact that ITW is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).