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. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Air Products and Chemicals (APD) is headquartered in Allentown, and is in the Basic Materials sector. The stock has seen a price change of 14.56% since the start of the year. Currently paying a dividend of $1.81 per share, the company has a dividend yield of 2.56%. In comparison, the Chemical - Diversified industry's yield is 1.5%, while the S&P 500's yield is 1.45%.

Looking at dividend growth, the company's current annualized dividend of $7.24 is up 1.7% from last year. Over the last 5 years, Air Products and Chemicals has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.01%. 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. Air Products and Chemicals's current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.

APD is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $13.20 per share, representing a year-over-year earnings growth rate of 9.73%.

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful 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 APD is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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