If you're looking to make money while you sleep, dividend stocks can be an excellent place to start. Dividend-paying companies can be a solid source of passive income for investors. These companies tend to be less risky and generally deliver steady returns over time.
According to a study by Hartford Funds, since 1973, dividend payers have outperformed an equal-weighted S&P 500 index with average annual returns of 9.2% versus 7.7% with less volatility. Dividend growers performed even better, returning 10.2% on average.
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BlackRock (BLK 0.69%) is one company with a solid dividend yield of 3%, and it has raised its payout each year for the past 14 years. If you're considering adding a steady dividend payer to your portfolio today, BlackRock is a solid choice. Here's why.
BlackRock is the world's largest asset manager
Nobody manages assets at the scale that BlackRock does. Its $9.4 trillion in assets under management (AUM) makes it the world's largest asset manager, outpacing Vanguard ($7.2 trillion in AUM) and Fidelity ($3.8 trillion in AUM).
BlackRock has a robust economic moat because of its wide array of investment products for both retail and professional investors. The company offers 1,300 exchange-traded fund (ETF) products across equities, fixed-income, real estate, and other alternative investments. It also offers thematic ETFs, which allow investors to invest in themes that will shape the future, including artificial intelligence, cybersecurity, and medical technology.
Its ETFs set it apart from the competition
BlackRock has come a long way over the last decade and a half. The inflection point for the company came in 2009. At the time, BlackRock was the fourth-largest asset manager, with $1.1 trillion in AUM. It then purchased the iShares brand (its ETF offering) from Barclays, and that acquisition has rewarded BlackRock nicely.
The acquisition helped BlackRock gain footing in the growing ETF space and gave it a firm foundation to build on over time. At the same time, passively managed investments grew in popularity. Investors gravitated toward these investments because they could match some index like the S&P 500, are relatively easy to buy, and have low expenses relative to actively managed funds.
Image source: BlackRock.
How it navigated challenging market conditions last year
Asset managers rely on AUM to grow their earnings. The ones who succeed long-term consistently increase their AUM base, whether through investment returns or inflows from investors.
BlackRock has shown an ability to perform well in challenging market conditions over the last couple of years. Last year was incredibly difficult for the asset manager as stocks and bonds declined in value, dragging down its AUM in the process. However, BlackRock did an excellent job attracting more of Wall Street's money, thanks to its many investment choices.
Investors have flocked to fixed-income investments, which include things like Treasury bonds, investment-grade debt, and municipal bonds. Last year, the company saw a record-high $123 billion flow into these funds, which continued into the early part of this year amid the regional banking crisis in March.
BlackRock is a solid dividend stock for the long haul
BLK Dividend data by YCharts
BlackRock's dividend payout ratio is a reasonable 56% and has averaged 45% over the last decade. While the ratio is a little on the high end, it should come down more toward historical levels as its earnings recover following a challenging year in 2022. BlackRock's bottom line has improved, growing by 5% through nine months this year, including 14% growth in the third quarter.
BlackRock is a massive player in the investing world because of its wide array of product offerings. It has a strong economic moat, and its large AUM base provides it with a steady source of cash flows, making it a solid dividend stock to own for the long haul.
