Why Morgan Stanley (MS) is a Top Dividend Stock for Your Portfolio

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Headquartered in New York, Morgan Stanley (MS) is a Finance stock that has seen a price change of 18.53% so far this year. Currently paying a dividend of $1.15 per share, the company has a dividend yield of 2.19%. In comparison, the Financial - Investment Bank industry's yield is 1.15%, while the S&P 500's yield is 1.34%.

Looking at dividend growth, the company's current annualized dividend of $4.60 is up 19.5% from last year. Over the last 5 years, Morgan Stanley has increased its dividend 4 times on a year-over-year basis for an average annual increase of 22.85%. 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. Morgan Stanley's current payout ratio is 32%, meaning it paid out 32% of its trailing 12-month EPS as dividend.

MS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $12.79 per share, with earnings expected to increase 25.27% from the year ago period.

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.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MS 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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This article originally published on Zacks Investment Research (zacks.com).

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