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This is Why United Technologies (UTX) is a Great Dividend Stock

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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.

United Technologies in Focus

Based in Farmington, United Technologies (UTX) is in the Conglomerates sector, and so far this year, shares have seen a price change of 27.86%. The maker of elevators, jet engines and other products is paying out a dividend of $0.74 per share at the moment, with a dividend yield of 2.16% compared to the Diversified Operations industry's yield of 1.44% and the S&P 500's yield of 1.9%.

Looking at dividend growth, the company's current annualized dividend of $2.94 is up 3.7% from last year. United Technologies has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 4.01%. 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. United Technologies's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, UTX expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $8.03 per share, representing a year-over-year earnings growth rate of 5.52%.

Bottom Line

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. With that in mind, UTX 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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