Why JPMorgan Chase & Co. (JPM) Is the Best Dividend Stock for Your Portfolio

Earning big returns from your financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. However, as an income investor, your primary goal is to generate a steady cash flow from each of your liquid investments.

While cash flow can come from interest on bonds or interest on other types of investments, income investors focus on dividends. A dividend is a desired distribution of a company’s earnings paid to shareholders, and investors often view it by its dividend yield, a measure that measures the dividend as a percentage of the current stock price. Many academic studies show that dividends make up a significant portion of long-term returns, with dividend contributions in many cases exceeding one-third of total returns.

JPMorgan Chase & Co. in the spotlight

JPMorgan Chase & Co. (JPM) is headquartered in New York and operates in the Financial sector. The stock price has changed by 24.9% since the beginning of the year. Currently paying a dividend of $1.15 per share, the company has a dividend yield of 2.17%. For comparison, the Banks – Major Regional industry’s dividend yield is 3.28%, while the S&P 500’s yield is 1.59%.

In terms of dividend growth, the company’s current annual dividend of $4.60 is up 13.6% from last year. Over the past 5 years, JPMorgan Chase & Co. has increased its dividend 3 times year-over-year, for an average annual increase of 5.21%. Looking ahead, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as dividends. JPMorgan Chase & Co.’s current payout ratio is 27%. This means that it has paid out 27% of its trailing 12-month earnings per share as dividends.

JPM expects earnings to grow this fiscal year as well. The Zacks Consensus Estimate for 2024 is $16.78 per share, with earnings expected to increase 3.39% from the same period last year.

Summary

Investors like dividends for many reasons, including the significant boost they can give you when investing in a stock, the reduced risk of your portfolio, and the tax benefits. But not every company offers a quarterly payment.

For example, it’s rare for a tech startup or a large growth stock to offer a dividend to its shareholders. It’s more common for larger companies with more established earnings to pay dividends. Income investors need to be aware that high-yielding stocks tend to struggle during periods of rising interest rates. Still, they can take comfort in the fact that JPM is not only an attractive dividend play, but also an attractive investment opportunity with a Zacks Rank #2 (Buy).

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