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Avery Dennison (AVY) is a Top Dividend Stock Right Now: Should You Buy?

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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 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

Avery Dennison in Focus

Headquartered in Glendale, Avery Dennison (AVY - Free Report) is an Industrial Products stock that has seen a price change of 28.65% so far this year. The maker of office products is paying out a dividend of $0.58 per share at the moment, with a dividend yield of 2.01% compared to the Office Supplies industry's yield of 2.1% and the S&P 500's yield of 1.96%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.32 is up 15.4% from last year. Avery Dennison has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.87%. 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. Avery Dennison's current payout ratio is 38%. This means it paid out 38% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, AVY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $6.57 per share, with earnings expected to increase 8.42% 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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AVY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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