All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Bristol-Myers Squibb in Focus
Bristol-Myers Squibb (BMY) is headquartered in New York, and is in the Medical sector. The stock has seen a price change of -7.14% since the start of the year. Currently paying a dividend of $0.41 per share, the company has a dividend yield of 3.4%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.84%, while the S&P 500's yield is 1.92%.
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%. 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. Bristol-Myers's current payout ratio is 38%. This means it paid out 38% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BMY for this fiscal year. The Zacks Consensus Estimate for 2019 is $4.28 per share, which represents a year-over-year growth rate of 7.54%.
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.
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, BMY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
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