Why BlackRock (BLK) is a Great Dividend Stock Right Now
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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.
BlackRock in Focus
Headquartered in New York, BlackRock (BLK) is a Finance stock that has seen a price change of 15.82% so far this year. The investment firm is currently shelling out a dividend of $3.63 per share, with a dividend yield of 2.49%. This compares to the Financial - Investment Management industry's yield of 2.41% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $14.52 is up 10% from last year. Over the last 5 years, BlackRock has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.50%. 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. BlackRock's current payout ratio is 48%. This means it paid out 48% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BLK for this fiscal year. The Zacks Consensus Estimate for 2020 is $29.24 per share, with earnings expected to increase 2.67% 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.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BLK 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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