All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Alexandria Real Estate Equities in Focus
Based in Pasadena, Alexandria Real Estate Equities (ARE) is in the Finance sector, and so far this year, shares have seen a price change of -1.38%. The life science real estate company is paying out a dividend of $1.06 per share at the moment, with a dividend yield of 2.66% compared to the REIT and Equity Trust - Other industry's yield of 3.72% and the S&P 500's yield of 1.63%.
Looking at dividend growth, the company's current annualized dividend of $4.24 is up 6% from last year. Over the last 5 years, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.25%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Alexandria Real Estate Equities's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ARE for this fiscal year. The Zacks Consensus Estimate for 2020 is $7.55 per share, with earnings expected to increase 8.48% 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. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ARE is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
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