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.
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 8.6%. The investment firm is paying out a dividend of $3.3 per share at the moment, with a dividend yield of 3.09% compared to the Financial - Investment Management industry's yield of 2.98% and the S&P 500's yield of 2.03%.
Looking at dividend growth, the company's current annualized dividend of $13.20 is up 9.8% from last year. In the past five-year period, 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 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BLK expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $27.79 per share, which represents a year-over-year growth rate of 3.19%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BLK presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).