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Illinois Tool Works (ITW) is a Top Dividend Stock Right Now: Should You Buy?
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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
Based in Glenview, Illinois Tool Works (ITW - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of -5.65%. Currently paying a dividend of $1.4 per share, the company has a dividend yield of 2.27%. In comparison, the Manufacturing - General Industrial industry's yield is 0.09%, while the S&P 500's yield is 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.60 is up 3.3% 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 7.04%. 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.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2024 is $10.24 per share, which represents a year-over-year growth rate of 4.70%.
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. But, not every company offers 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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Illinois Tool Works (ITW) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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
Based in Glenview, Illinois Tool Works (ITW - Free Report) is in the Industrial Products sector, and so far this year, shares have seen a price change of -5.65%. Currently paying a dividend of $1.4 per share, the company has a dividend yield of 2.27%. In comparison, the Manufacturing - General Industrial industry's yield is 0.09%, while the S&P 500's yield is 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $5.60 is up 3.3% 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 7.04%. 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.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2024 is $10.24 per share, which represents a year-over-year growth rate of 4.70%.
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. But, not every company offers 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).