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Are You Looking for a High-Growth Dividend Stock? Douglas Emmett (DEI) Could Be a Great Choice

Zacks Equity Research
·3 mins read

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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.

Douglas Emmett in Focus

Based in Santa Monica, Douglas Emmett (DEI) is in the Finance sector, and so far this year, shares have seen a price change of -30.5%. The real estate investment trust is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 3.67% compared to the REIT and Equity Trust - Other industry's yield of 5.91% and the S&P 500's yield of 2.37%.

Looking at dividend growth, the company's current annualized dividend of $1.12 is up 5.7% from last year. In the past five-year period, Douglas Emmett has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.89%. 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, Douglas Emmett's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, DEI expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.25 per share, representing a year-over-year earnings growth rate of 7.14%.

Bottom Line

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.

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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, DEI 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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Zacks Investment Research