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Are You Looking for a High-Growth Dividend Stock? State Street Corporation (STT) Could Be a Great Choice

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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.

State Street Corporation in Focus

Headquartered in Boston, State Street Corporation (STT - Free Report) is a Finance stock that has seen a price change of 16.41% so far this year. The company is currently shelling out a dividend of $0.52 per share, with a dividend yield of 2.69%. This compares to the Banks - Major Regional industry's yield of 2.6% and the S&P 500's yield of 1.45%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.28 is up 9.6% from last year. State Street Corporation has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.43%. 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. Right now, State Street Corporation's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.

STT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $7.40 per share, which represents a year-over-year growth rate of 10.45%.

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. 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 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, STT 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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