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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in New York, ABM Industries (ABM) is a Business Services stock that has seen a price change of 3.73% so far this year. The provider of cleaning and other maintenance services for commercial buildings, hospitals and airports is paying out a dividend of $0.26 per share at the moment, with a dividend yield of 2% compared to the Building Products - Maintenance Service industry's yield of 0.72% and the S&P 500's yield of 1.51%.
Looking at dividend growth, the company's current annualized dividend of $1.06 is up 17.8% from last year. Over the last 5 years, ABM Industries has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.31%. 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. ABM Industries's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ABM expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.71 per share, representing a year-over-year earnings growth rate of 3.92%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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, ABM 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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