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This is Why Illinois Tool Works (ITW) is a Great Dividend Stock
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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. 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 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.
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 -13.69% so far this year. The equipment manufacturer for the transportation, power, food and construction industries is paying out a dividend of $1.22 per share at the moment, with a dividend yield of 2.29% compared to the Manufacturing - General Industrial industry's yield of 0.18% and the S&P 500's yield of 1.45%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.88 is up 3.4% from last year. In the past five-year period, Illinois Tool Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.12%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Illinois Tool Works's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2022 is $9.12 per share, representing a year-over-year earnings growth rate of 6.92%.
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. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ITW 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 is Why Illinois Tool Works (ITW) is a Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.
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 -13.69% so far this year. The equipment manufacturer for the transportation, power, food and construction industries is paying out a dividend of $1.22 per share at the moment, with a dividend yield of 2.29% compared to the Manufacturing - General Industrial industry's yield of 0.18% and the S&P 500's yield of 1.45%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.88 is up 3.4% from last year. In the past five-year period, Illinois Tool Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.12%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Illinois Tool Works's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2022 is $9.12 per share, representing a year-over-year earnings growth rate of 6.92%.
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. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ITW 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).