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.
Cash flow can come from bond interest, interest from other types of investments, and, of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Based in New York, Morgan Stanley (MS) is in the Finance sector, and so far this year, shares have seen a price change of 10.64%. The investment bank is currently shelling out a dividend of $1.00 per share, with a dividend yield of 2.88%. This compares to the Financial - Investment Bank industry's yield of 1.05% and the S&P 500's yield of 1.49%.
Looking at dividend growth, the company's current annualized dividend of $4.00 is up 12.7% from last year. Over the last 5 years, Morgan Stanley has increased its dividend 4 times on a year-over-year basis for an average annual increase of 22.85%. 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. Morgan Stanley's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, MS expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $8.78 per share, representing a year-over-year earnings growth rate of 10.44%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that MS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Morgan Stanley (MS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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