Why Bristol-Myers Squibb (BMY) is a Top Dividend Stock for Your Portfolio
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bristol-Myers Squibb in Focus
Bristol-Myers Squibb (BMY) is headquartered in New York, and is in the Medical sector. The stock has seen a price change of -8.7% since the start of the year. Currently paying a dividend of $0.41 per share, the company has a dividend yield of 3.46%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.82%, while the S&P 500's yield is 1.91%.
Looking at dividend growth, the company's current annualized dividend of $1.64 is up 2.5% from last year. Over the last 5 years, Bristol-Myers Squibb has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.48%. 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. Right now, Bristol-Myers's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BMY expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $4.26 per share, with earnings expected to increase 7.04% 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, BMY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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