Why Bristol-Myers Squibb (BMY) 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. 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.
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 -12.66%. The biopharmaceutical company is paying out a dividend of $0.41 per share at the moment, with a dividend yield of 3.61% compared to the Large Cap Pharmaceuticals industry's yield of 3.09% and the S&P 500's yield of 1.87%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.64 is up 2.5% from last year. Bristol-Myers Squibb has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 2.48%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Bristol-Myers's current payout ratio is 40%. This means it paid out 40% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BMY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $4.18 per share, with earnings expected to increase 5.03% 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. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BMY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
To read this article on Zacks.com click here.
