Are You Looking for a High-Growth Dividend Stock?

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

Korn/Ferry in Focus

Based in Los Angeles, Korn/Ferry (KFY) is in the Business Services sector, and so far this year, shares have seen a price change of 13.9%. The staffing company is paying out a dividend of $0.37 per share at the moment, with a dividend yield of 2.19% compared to the Staffing Firms industry’s yield of 1.91% and the S&P 500’s yield of 1.53%.

Looking at dividend growth, the company’s current annualized dividend of $1.48 is up 45.1% from last year. In the past five-year period, Korn/Ferry has increased its dividend 4 times on a year-over-year basis for an average annual increase of 29.30%. 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, Korn/Ferry’s payout ratio is 31%, which means it paid out 31% of its trailing 12-month EPS as dividend.

KFY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $4.75 per share, which represents a year-over-year growth rate of 10.98%.

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. But, not every company offers 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, KFY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.