Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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
BlackRock (BLK - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 14.1% since the start of the year. Currently paying a dividend of $3.3 per share, the company has a dividend yield of 2.94%. In comparison, the Financial - Investment Management industry's yield is 2.75%, while the S&P 500's yield is 1.92%.
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 11.57%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 50%. This means it paid out 50% 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 $27.62 per share, with earnings expected to increase 2.56% from the year ago period.
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.
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 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).