Nasdaq (NDAQ) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Nasdaq in Focus
Based in New York, Nasdaq (NDAQ) is in the Finance sector, and so far this year, shares have seen a price change of -13.37%. The exchange operator is paying out a dividend of $0.47 per share at the moment, with a dividend yield of 2.03% compared to the Securities and Exchanges industry's yield of 1.88% and the S&P 500's yield of 2.41%.
Looking at dividend growth, the company's current annualized dividend of $1.88 is up 1.6% from last year. Over the last 5 years, Nasdaq has increased its dividend 5 times on a year-over-year basis for an average annual increase of 20.48%. 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. Nasdaq's current payout ratio is 38%. This means it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NDAQ expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $5.50 per share, representing a year-over-year earnings growth rate of 10%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NDAQ 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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