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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
BlackRock in Focus
Headquartered in New York, BlackRock (BLK - Free Report) is a Finance stock that has seen a price change of 12.55% so far this year. The investment firm is paying out a dividend of $3.3 per share at the moment, with a dividend yield of 2.99% compared to the Financial - Investment Management industry's yield of 2.82% and the S&P 500's yield of 1.9%.
In terms of 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%, meaning it paid out 50% 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 $27.53 per share, with earnings expected to increase 2.23% from the year ago period.
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. 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).