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Why BlackRock (BLK) is a Great Dividend Stock Right Now

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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

BlackRock in Focus

BlackRock (BLK) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 13.78% since the start of the year. The investment firm is paying out a dividend of $3.3 per share at the moment, with a dividend yield of 2.95% compared to the Financial - Investment Management industry's yield of 3.02% and the S&P 500's yield of 1.94%.

In terms of dividend growth, the company's current annualized dividend of $13.20 is up 9.8% from last year. In the past five-year period, BlackRock has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.18%. 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. BlackRock's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.

BLK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $27.71 per share, which represents a year-over-year growth rate of 2.90%.

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. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BLK 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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