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Why TD Ameritrade (AMTD) 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. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
TD Ameritrade in Focus
TD Ameritrade (AMTD - Free Report) is headquartered in Omaha, and is in the Finance sector. The stock has seen a price change of 5.66% since the start of the year. The online brokerage is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.32%. This compares to the Financial - Investment Bank industry's yield of 0.78% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 42.9% from last year. In the past five-year period, TD Ameritrade has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.25%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. TD Ameritrade's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
AMTD is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.04 per share, representing a year-over-year earnings growth rate of 20.96%.
Bottom Line
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.
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. With that in mind, AMTD 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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Why TD Ameritrade (AMTD) 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. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
TD Ameritrade in Focus
TD Ameritrade (AMTD - Free Report) is headquartered in Omaha, and is in the Finance sector. The stock has seen a price change of 5.66% since the start of the year. The online brokerage is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.32%. This compares to the Financial - Investment Bank industry's yield of 0.78% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 42.9% from last year. In the past five-year period, TD Ameritrade has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.25%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. TD Ameritrade's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
AMTD is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.04 per share, representing a year-over-year earnings growth rate of 20.96%.
Bottom Line
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.
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. With that in mind, AMTD 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).