Yahoo Finance Why State Street Corporation (STT) 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. 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.
State Street Corporation in Focus
State Street Corporation (STT) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of -1.16% since the start of the year. The company is currently shelling out a dividend of $0.69 per share, with a dividend yield of 3.61%. This compares to the Banks - Major Regional industry's yield of 3.6% and the S&P 500's yield of 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.76 is up 4.5% from last year. In the past five-year period, State Street Corporation has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.73%. 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. Right now, State Street's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, STT expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $7.94 per share, representing a year-over-year earnings growth rate of 3.66%.
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. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, STT 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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