Essex Property Trust (ESS) is a Top Dividend Stock Right Now: Should You Buy?
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Essex Property Trust in Focus
Based in San Mateo, Essex Property Trust (ESS) is in the Finance sector, and so far this year, shares have seen a price change of 25.54%. The real estate investment trust is currently shelling out a dividend of $1.95 per share, with a dividend yield of 2.53%. This compares to the REIT and Equity Trust - Residential industry's yield of 3.18% and the S&P 500's yield of 1.88%.
In terms of dividend growth, the company's current annualized dividend of $7.80 is up 4.8% from last year. Essex Property Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.89%. 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. Essex Property Trust's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ESS expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $13.19 per share, with earnings expected to increase 4.93% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. That said, they can take comfort from the fact that ESS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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