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 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.
Simon Property in Focus
Simon Property (SPG) is headquartered in Indianapolis, and is in the Finance sector. The stock has seen a price change of 8.26% since the start of the year. The shopping mall real estate investment trust is paying out a dividend of $2 per share at the moment, with a dividend yield of 4.4% compared to the REIT and Equity Trust - Retail industry's yield of 4.48% and the S&P 500's yield of 1.97%.
Taking a look at the company's dividend growth, its current annualized dividend of $8 is up 1.3% from last year. Over the last 5 years, Simon Property has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.68%. 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. Simon Property's current payout ratio is 66%, meaning it paid out 66% of its trailing 12-month EPS as dividend.
SPG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $12.47 per share, which represents a year-over-year growth rate of 2.80%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. With that in mind, SPG 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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Simon Property Group, Inc. (SPG) : Free Stock Analysis Report
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