Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Legg Mason in Focus
Headquartered in Baltimore, Legg Mason is a Finance stock that has seen a price change of 3.84% so far this year. The money manager is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 4.29% compared to the Financial - Investment Management industry's yield of 2.23% and the S&P 500's yield of 1.75%.
In terms of dividend growth, the company's current annualized dividend of $1.60 is up 17.6% from last year. Over the last 5 years, Legg Mason has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.34%. 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. Legg Mason's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
LM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.67 per share, with earnings expected to increase 1,065.79% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, LM 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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Why Legg Mason (LM) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Legg Mason in Focus
Headquartered in Baltimore, Legg Mason is a Finance stock that has seen a price change of 3.84% so far this year. The money manager is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 4.29% compared to the Financial - Investment Management industry's yield of 2.23% and the S&P 500's yield of 1.75%.
In terms of dividend growth, the company's current annualized dividend of $1.60 is up 17.6% from last year. Over the last 5 years, Legg Mason has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.34%. 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. Legg Mason's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
LM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.67 per share, with earnings expected to increase 1,065.79% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, LM 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).