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Are You Looking for a High-Growth Dividend Stock? Air Products and Chemicals (APD) Could Be a Great Choice

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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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Air Products and Chemicals in Focus

Air Products and Chemicals (APD - Free Report) is headquartered in Allentown, and is in the Basic Materials sector. The stock has seen a price change of -12.18% since the start of the year. The seller of gases for industrial, medical and other uses is paying out a dividend of $1.16 per share at the moment, with a dividend yield of 2.25% compared to the Chemical - Diversified industry's yield of 1.98% and the S&P 500's yield of 2.31%.

Looking at dividend growth, the company's current annualized dividend of $4.64 is up 1.3% from last year. Air Products and Chemicals has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.73%. 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. Air Products and Chemicals's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, APD expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $9.46 per share, with earnings expected to increase 15.23% 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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, APD 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).


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