All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
BlackRock in Focus
Based in New York, BlackRock (BLK - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 12.71%. The investment firm is paying out a dividend of $3.3 per share at the moment, with a dividend yield of 2.98% compared to the Financial - Investment Management industry's yield of 2.98% and the S&P 500's yield of 1.92%.
Taking a look at the company's dividend growth, its current annualized dividend of $13.20 is up 9.8% from last year. Over the last 5 years, BlackRock has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.18%. 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. BlackRock's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BLK for this fiscal year. The Zacks Consensus Estimate for 2019 is $27.03 per share, which represents a year-over-year growth rate of 0.37%.
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. That said, they can take comfort from the fact that BLK is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).