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Why Sanofi (SNY) is a Great Dividend Stock Right Now

Zacks Equity Research

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.

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.

Sanofi in Focus

Sanofi (SNY) is headquartered in Paris, and is in the Medical sector. The stock has seen a price change of 7.11% since the start of the year. The drugmaker is currently shelling out a dividend of $1.17 per share, with a dividend yield of 2.18%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.49% and the S&P 500's yield of 1.85%.

Looking at dividend growth, the company's current annualized dividend of $1.17 is up 1.2% from last year. Over the last 5 years, Sanofi has increased its dividend 3 times on a year-over-year basis for an average annual increase of 1.80%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Sanofi's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, SNY expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $3.33 per share, which represents a year-over-year growth rate of 0.30%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SNY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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