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Are You Looking for a High-Growth Dividend Stock? JPMorgan Chase (JPM) Could Be a Great Choice

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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 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.

JPMorgan Chase in Focus

Headquartered in New York, JPMorgan Chase (JPM - Free Report) is a Finance stock that has seen a price change of 16.57% so far this year. The biggest U.S. bank by assets is paying out a dividend of $0.8 per share at the moment, with a dividend yield of 2.81% compared to the Banks - Major Regional industry's yield of 2.84% and the S&P 500's yield of 1.88%.

In terms of dividend growth, the company's current annualized dividend of $3.20 is up 29% from last year. JPMorgan Chase has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 15.18%. 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. JP Morgan's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.

JPM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $10.03 per share, which represents a year-over-year growth rate of 11.44%.

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. 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. 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 JPM is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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