Are You Looking for a High-Growth Dividend Stock? Dick's Sporting Goods (DKS) Could Be a Great Choice

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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.

Dick's Sporting Goods in Focus

Headquartered in Coraopolis, Dick's Sporting Goods (DKS) is a Retail-Wholesale stock that has seen a price change of 23.56% so far this year. The sporting goods retailer is currently shelling out a dividend of $0.28 per share, with a dividend yield of 2.85%. This compares to the Retail - Miscellaneous industry's yield of 0.6% and the S&P 500's yield of 1.87%.

Looking at dividend growth, the company's current annualized dividend of $1.10 is up 22.2% from last year. Dick's Sporting Goods has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 14.29%. 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. Dick's's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for DKS for this fiscal year. The Zacks Consensus Estimate for 2019 is $3.33 per share, with earnings expected to increase 2.78% from the year ago period.

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, DKS presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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