Why Legg Mason (LM) is a Top Dividend Stock for Your Portfolio
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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Legg Mason in Focus
Headquartered in Baltimore, Legg Mason (LM) is a Finance stock that has seen a price change of 42.81% so far this year. The money manager is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 4.39% compared to the Financial - Investment Management industry's yield of 2.31% and the S&P 500's yield of 1.8%.
Looking at dividend growth, the company's current annualized dividend of $1.60 is up 17.6% from last year. Over the last 5 years, Legg Mason has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.62%. 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. Legg Mason's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, LM expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.63 per share, with earnings expected to increase 1,055.26% from the year ago period.
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. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that LM 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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Legg Mason, Inc. (LM) : Free Stock Analysis Report
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