Morgan Stanley (MS) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Morgan Stanley in Focus
Morgan Stanley (MS) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 11.73% since the start of the year. The investment bank is currently shelling out a dividend of $0.85 per share, with a dividend yield of 3.26%. This compares to the Financial - Investment Bank industry's yield of 0.83% and the S&P 500's yield of 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.40 is up 4.6% from last year. Morgan Stanley has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 28.06%. 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. Right now, Morgan Stanley's payout ratio is 54%, which means it paid out 54% of its trailing 12-month EPS as dividend.
MS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $7 per share, with earnings expected to increase 28.21% from the year ago period.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MS 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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