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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
CoreSite Realty in Focus
Based in Denver, CoreSite Realty (COR) is in the Finance sector, and so far this year, shares have seen a price change of 12.18%. The operator of large computing warehouses is currently shelling out a dividend of $1.1 per share, with a dividend yield of 4.5%. This compares to the REIT and Equity Trust - Other industry's yield of 4.41% and the S&P 500's yield of 1.97%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.40 is up 6.3% from last year. CoreSite Realty has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 31.92%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, CoreSite's payout ratio is 83%, which means it paid out 83% of its trailing 12-month EPS as dividend.
COR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $5.30 per share, which represents a year-over-year growth rate of 4.74%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their 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. That said, they can take comfort from the fact that COR 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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