All investors want huge returns from stocks, bonds, ETFs, and other instruments. However, income investors focus on creating steady cash flow from their liquid investments.
Bond interest, other investment interest, and dividends provide cash flow. Dividend yield, a percentage of the stock price, is a popular tool for investors to evaluate a company's dividend. Dividends often make up over one-third of long-term earnings, according to academic studies.
Boston-based State Street Corporation (STT) is a finance company that has down 6.49% this year. The company pays a $0.69 per share dividend, yielding 3.81% compared to the Banks - Major Regional industry's 3.81% and the S&P 500's 1.58%.
The company's $2.76 yearly dividend is up 4.5% from previous year. State Street Corporation has raised its dividend 4 times in the past 5 years, averaging 7.65% annually
Earnings growth and payout ratio—the percentage of a company's annual earnings per share paid out as dividends—will affect dividend growth. The payout ratio for State Street Corporation is 36%. It distributed 36% of its trailing 12-month EPS as dividends.
STT expects earnings growth this fiscal year. The Zacks Consensus Estimate for 2024 is $7.83 per share, up 2.22% year-over-year.
Investors enjoy dividends because they boost stock gains, lower portfolio risk, and offer tax benefits. However, not all companies pay quarterly.
Tech startups and big growth companies rarely pay dividends. Larger corporations with bigger profits usually pay dividends. Income investors must remember that high-yielding stocks struggle when interest rates rise.
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