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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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
State Street Corporation in Focus
Based in Boston, State Street Corporation (STT) is in the Finance sector, and so far this year, shares have seen a price change of 0.95%. Currently paying a dividend of $0.57 per share, the company has a dividend yield of 2.43%. In comparison, the Banks - Major Regional industry's yield is 2.39%, while the S&P 500's yield is 1.34%.
Looking at dividend growth, the company's current annualized dividend of $2.28 is up 4.6% from last year. Over the last 5 years, State Street Corporation has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.29%. 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. State Street Corporation's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.
STT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $8.64 per share, with earnings expected to increase 16.13% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that STT 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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State Street Corporation (STT) : Free Stock Analysis Report
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