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Are You Looking for a High-Growth Dividend Stock? Bristol-Myers Squibb (BMY) Could Be a Great Choice

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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.

Bristol-Myers Squibb in Focus

Based in New York, Bristol-Myers Squibb (BMY) is in the Medical sector, and so far this year, shares have seen a price change of -17.76%. The biopharmaceutical company is currently shelling out a dividend of $0.45 per share, with a dividend yield of 3.41%. This compares to the Large Cap Pharmaceuticals industry's yield of 3.57% and the S&P 500's yield of 2.41%.

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In terms of dividend growth, the company's current annualized dividend of $1.80 is up 9.8% from last year. Bristol-Myers Squibb has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 2.39%. 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. Bristol-Myers's current payout ratio is 35%, meaning it paid out 35% of its trailing 12-month EPS as dividend.

BMY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $6.14 per share, which represents a year-over-year growth rate of 30.92%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. That said, they can take comfort from the fact that BMY is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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