Yahoo Finance Why Illinois Tool Works (ITW) is a Great Dividend Stock Right Now
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.
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.
Illinois Tool Works in Focus
Illinois Tool Works (ITW) is headquartered in Glenview, and is in the Industrial Products sector. The stock has seen a price change of 4.98% since the start of the year. The equipment manufacturer for the transportation, power, food and construction industries is paying out a dividend of $1.31 per share at the moment, with a dividend yield of 2.27% compared to the Manufacturing - General Industrial industry's yield of 0.15% and the S&P 500's yield of 1.81%.
In terms of dividend growth, the company's current annualized dividend of $5.24 is up 3.6% from last year. Over the last 5 years, Illinois Tool Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.19%. 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. Right now, Illinois Tool Works's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ITW for this fiscal year. The Zacks Consensus Estimate for 2023 is $9.61 per share, which represents a year-over-year growth rate of 4.80%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ITW 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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Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
