State Street Corporation is a Top Dividend Stock Right Now: Should You Buy?

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 is a Finance stock that has seen a price change of 10.35% so far this year. The company is paying out a dividend of $0.69 per share at the moment, with a dividend yield of 3.23% compared to the Banks - Major Regional industry's yield of 3.32% and the S&P 500's yield of 1.56%.

Looking at dividend growth, the company's current annualized dividend of $2.76 is up 4.5% from last year. State Street Corporation has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 7.56%. 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. Right now, State Street's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, STT expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $8.13 per share, which represents a year-over-year growth rate of 6.14%.

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.

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. 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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