Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
National Retail Properties in Focus
Based in Orlando, National Retail Properties (NNN) is in the Finance sector, and so far this year, shares have seen a price change of 4.06%. The retail real estate investment trust is currently shelling out a dividend of $0.47 per share, with a dividend yield of 4.23%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.76% and the S&P 500's yield of 1.79%.
In terms of dividend growth, the company's current annualized dividend of $1.90 is up 2.2% from last year. National Retail Properties has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 3.91%. 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, National Retail Properties's payout ratio is 73%, which means it paid out 73% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NNN expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $2.66 per share, with earnings expected to increase 4.72% from the year ago period.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that NNN 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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