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

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.

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.

BlackRock in Focus

Based in New York, BlackRock (BLK) is in the Finance sector, and so far this year, shares have seen a price change of 7.89%. Currently paying a dividend of $3.3 per share, the company has a dividend yield of 3.11%. In comparison, the Financial - Investment Management industry's yield is 3%, while the S&P 500's yield is 1.92%.

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 11.57%. 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. BlackRock's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BLK for this fiscal year. The Zacks Consensus Estimate for 2019 is $27.50 per share, with earnings expected to increase 2.12% from the year ago period.

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. 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. With that in mind, BLK 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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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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