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Why State Street Corporation (STT) is a Top Dividend Stock for Your Portfolio
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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.
State Street Corporation in Focus
Headquartered in Boston, State Street Corporation (STT - Free Report) is a Finance stock that has seen a price change of 6.61% so far this year. Currently paying a dividend of $0.69 per share, the company has a dividend yield of 3.34%. In comparison, the Banks - Major Regional industry's yield is 3.44%, while the S&P 500's yield is 1.59%.
Looking at dividend growth, the company's current annualized dividend of $2.76 is up 4.5% 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 7.56%. 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, State Street's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for STT for this fiscal year. The Zacks Consensus Estimate for 2024 is $8.14 per share, which represents a year-over-year growth rate of 6.27%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that STT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Why State Street Corporation (STT) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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.
State Street Corporation in Focus
Headquartered in Boston, State Street Corporation (STT - Free Report) is a Finance stock that has seen a price change of 6.61% so far this year. Currently paying a dividend of $0.69 per share, the company has a dividend yield of 3.34%. In comparison, the Banks - Major Regional industry's yield is 3.44%, while the S&P 500's yield is 1.59%.
Looking at dividend growth, the company's current annualized dividend of $2.76 is up 4.5% 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 7.56%. 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, State Street's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for STT for this fiscal year. The Zacks Consensus Estimate for 2024 is $8.14 per share, which represents a year-over-year growth rate of 6.27%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that STT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).