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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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 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 -0.67% so far this year. The equipment manufacturer for the transportation, power, food and construction industries is paying out a dividend of $1.4 per share at the moment, with a dividend yield of 2.15% compared to the Manufacturing - General Industrial industry's yield of 0.09% and the S&P 500's yield of 1.57%.
In terms of dividend growth, the company's current annualized dividend of $5.60 is up 3.3% from last year. Illinois Tool Works has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.13%. 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 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2024 is $10.12 per share, which represents a year-over-year growth rate of 3.48%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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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 for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 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 -0.67% so far this year. The equipment manufacturer for the transportation, power, food and construction industries is paying out a dividend of $1.4 per share at the moment, with a dividend yield of 2.15% compared to the Manufacturing - General Industrial industry's yield of 0.09% and the S&P 500's yield of 1.57%.
In terms of dividend growth, the company's current annualized dividend of $5.60 is up 3.3% from last year. Illinois Tool Works has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.13%. 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 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2024 is $10.12 per share, which represents a year-over-year growth rate of 3.48%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).