BlackRock (BLK 0.99%) is the largest asset management firm in the country, with $9 trillion in assets under management. It's also the largest manager of exchange-traded funds (ETFs), through iShares. The ongoing surge in popularity of ETFs has helped propel BlackRock's growth over the past decade, and they should continue to drive profits over the next decade.
This year, BlackRock's stock price is up about 14% as of Friday's close, following a 47% gain in 2020. It also pays out a reliable dividend -- and for many investors, this combination of steady capital appreciation and attractive payouts makes it a stock worth considering. Let's take a closer look to see if BlackRock is the right dividend stock for you.
It has posted 12 years of rising dividends
BlackRock is not a Dividend Aristocrat, but it's well on its way, with 12 straight years of increases, including this year. The company increased its first-quarter dividend in January to $4.13 per share, a 13.7% increase over the previous quarter. Over the last five years, the dividend has grown at an average of 11% per year, which beats the average growth rate in the sector.
This dividend yields 2% at Friday's prices. The yield is simply how much of the stock price the dividend makes up. The current 2% is down from 2.7% a year ago, and lower than it has been over the past decade; however, it is still higher than the average yield for the financial sector, which is 1.7%, and the S&P 500, which is 1.4%.
BlackRock's stock price is high, at $819.30 per share, so some investors may be limited in the amount they can invest. But if you owned 50 shares, you would get $206.50 per quarter in dividend payouts and $826 per year -- and as we'll see, that's pretty sustainable.
Is it sustainable?
BlackRock's dividend payout ratio has been around 46% for the past three years, meaning it pays out a little less than half of its earnings in dividends. Anything under 50% is considered good, and the lower, the better, because that means that the company is probably not paying out cash to investors at the expense of something else.
This dividend certainly looks sustainable, given BlackRock's excellent financials and status in the industry. BlackRock is coming off a first quarter that saw a 19% increase in revenue, an 18% jump in earnings, and a record $172 billion in net inflows into its funds.
BlackRock has capitalized on its leadership in ETFs, which are poised for continued growth over the next decade, as well as in ESG (environmental, social, and governance) investing. This is another booming area of the market, and BlackRock has staked out a leadership position here, too, announcing that it will only be investing in companies that detail how their business plans are compatible with a net-zero emissions economy. Also, BlackRock has solid financials with an operating margin of 35% and more than $3.5 billion in free cash flow.
Over the past 10 years, BlackRock has posted an annualized return of 15.4%, which exceeds the S&P 500. Given its market-leading status and strength in ETFs and ESG investing, look for long-term sustained growth to continue. The company has delivered a rising annual dividend for the past 12 years and the future looks bright, not just for the dividend, but also for the capital appreciation potential. When taken together, it makes BlackRock an excellent choice for income investors.