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 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 -3.39% since the start of the year. The biopharmaceutical company is paying out a dividend of $0.41 per share at the moment, with a dividend yield of 3.27% compared to the Large Cap Pharmaceuticals industry's yield of 2.74% and the S&P 500's yield of 1.97%.
In terms of dividend growth, the company's current annualized dividend of $1.64 is up 2.5% from last year. In the past five-year period, Bristol-Myers Squibb has increased its dividend 4 times on a year-over-year basis for an average annual increase of 2.42%. 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%, meaning it paid out 40% of its trailing 12-month EPS as dividend.
BMY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.16 per share, which represents a year-over-year growth rate of 4.52%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BMY is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
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