All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 -32.62%. The real estate investment trust is currently shelling out a dividend of $0.28 per share, with a dividend yield of 3.79%. This compares to the REIT and Equity Trust - Other industry's yield of 4.23% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 5.7% from last year. Over the last 5 years, Douglas Emmett has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.14%. 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. Douglas Emmett's current payout ratio is 52%. This means it paid out 52% 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 $2.13 per share, representing a year-over-year earnings growth rate of 1.43%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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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