Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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
Headquartered in New York, Bristol-Myers Squibb (BMY) is a Medical stock that has seen a price change of -5.51% so far this year. The biopharmaceutical company is paying out a dividend of $0.45 per share at the moment, with a dividend yield of 2.97% compared to the Large Cap Pharmaceuticals industry's yield of 2.72% and the S&P 500's yield of 1.93%.
In terms of dividend growth, the company's current annualized dividend of $1.80 is up 9.8% 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 2.88%. 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 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.
BMY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $6.14 per share, representing a year-over-year earnings growth rate of 30.92%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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 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 #2 (Buy).
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BristolMyers Squibb Company (BMY) : Free Stock Analysis Report
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