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Morgan Stanley (MS) is a Top Dividend Stock Right Now: Should You Buy?

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.

Morgan Stanley in Focus

Based in New York, Morgan Stanley (MS) is in the Finance sector, and so far this year, shares have seen a price change of 6.08%. Currently paying a dividend of $0.85 per share, the company has a dividend yield of 3.44%. In comparison, the Financial - Investment Bank industry's yield is 0.45%, while the S&P 500's yield is 1.58%.

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In terms of dividend growth, the company's current annualized dividend of $3.40 is up 4.6% from last year. Over the last 5 years, Morgan Stanley has increased its dividend 4 times on a year-over-year basis for an average annual increase of 29.33%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Morgan Stanley's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for MS for this fiscal year. The Zacks Consensus Estimate for 2024 is $6.83 per share, which represents a year-over-year growth rate of 25.09%.

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.

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 must be conscious 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 MS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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