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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Invesco in Focus
Headquartered in Atlanta, Invesco (IVZ) is a Finance stock that has seen a price change of 10.64% so far this year. The investment management company is currently shelling out a dividend of $0.2 per share, with a dividend yield of 4.24%. This compares to the Financial - Investment Management industry's yield of 2.66% and the S&P 500's yield of 1.48%.
In terms of dividend growth, the company's current annualized dividend of $0.82 is up 0.6% from last year. In the past five-year period, Invesco has increased its dividend 3 times on a year-over-year basis for an average annual increase of 4.32%. 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. Invesco's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, IVZ expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.85 per share, representing a year-over-year earnings growth rate of 8.19%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, IVZ 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
