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Are You Looking for a High-Growth Dividend Stock? Marriott Vacations Worldwide (VAC) 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Marriott Vacations Worldwide in Focus

Headquartered in Orlando, Marriott Vacations Worldwide (VAC - Free Report) is a Consumer Discretionary stock that has seen a price change of -52.63% so far this year. The timeshare company is paying out a dividend of $1.08 per share at the moment, with a dividend yield of 3.54% compared to the Hotels and Motels industry's yield of 1.33% and the S&P 500's yield of 2.51%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.16 is up 14.3% from last year. In the past five-year period, Marriott Vacations Worldwide has increased its dividend 5 times on a year-over-year basis for an average annual increase of 15.82%. 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. Right now, Marriott's payout ratio is 28%, which means it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for VAC for this fiscal year. The Zacks Consensus Estimate for 2020 is $9.50 per share, which represents a year-over-year growth rate of 21.64%.

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. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that VAC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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