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.
Morgan Stanley in Focus
Based in New York, Morgan Stanley (MS) is in the Finance sector, and so far this year, shares have seen a price change of 2.89%. The investment bank is currently shelling out a dividend of $0.93 per share, with a dividend yield of 2.86%. This compares to the Financial - Investment Bank industry's yield of 1.18% and the S&P 500's yield of 1.54%.
Looking at dividend growth, the company's current annualized dividend of $3.70 is up 4.2% 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 25.22%. 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. Morgan Stanley's current payout ratio is 43%. This means it paid out 43% 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 $8.58 per share, with earnings expected to increase 7.92% from the year ago period.
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. However, not all companies offer 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MS 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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Morgan Stanley (MS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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