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Are You Looking for a High-Growth Dividend Stock?

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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 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.

Gatx in Focus

Headquartered in Chicago, Gatx (GATX - Free Report) is a Transportation stock that has seen a price change of -3.26% so far this year. Currently paying a dividend of $0.52 per share, the company has a dividend yield of 2.06%. In comparison, the Transportation - Equipment and Leasing industry's yield is 1.25%, while the S&P 500's yield is 1.6%.

Looking at dividend growth, the company's current annualized dividend of $2.08 is up 4% from last year. Gatx has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.46%. 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. Right now, Gatx's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.

GATX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $5.83 per share, with earnings expected to increase 15.22% from the year ago period.

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. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, GATX 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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