Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Boston, State Street Corporation (STT) is a Finance stock that has seen a price change of 0.84% so far this year. Currently paying a dividend of $0.84 per share, the company has a dividend yield of 2.58%. In comparison, the Banks - Major Regional industry's yield is 2.95%, while the S&P 500's yield is 1.31%.
Looking at dividend growth, the company's current annualized dividend of $3.36 is up 7.7% from last year. Over the last 5 years, State Street Corporation has increased its dividend 4 times on a year-over-year basis for an average annual increase of 9.16%. 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. State Street's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for STT for this fiscal year. The Zacks Consensus Estimate for 2026 is $11.55 per share, with earnings expected to increase 12.14% from the year ago period.
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 its 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, STT 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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State Street Corporation (STT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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