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Why JPMorgan Chase & Co. (JPM) is a Top Dividend Stock for Your Portfolio

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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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

JPMorgan Chase & Co. In Focus

Headquartered in New York, JPMorgan Chase & Co. (JPM - Free Report) is a Finance stock that has seen a price change of 17.3% so far this year. Currently paying a dividend of $1.15 per share, the company has a dividend yield of 2.31%. In comparison, the Banks - Major Regional industry's yield is 3.54%, while the S&P 500's yield is 1.58%.

Looking at dividend growth, the company's current annualized dividend of $4.60 is up 13.6% from last year. In the past five-year period, JPMorgan Chase & Co. has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.10%. 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, JPMorgan Chase & Co.'s payout ratio is 24%, which means it paid out 24% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for JPM for this fiscal year. The Zacks Consensus Estimate for 2024 is $16.31 per share, with earnings expected to increase 0.49% 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. It's important to keep in mind that not all companies provide 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, JPM 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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