Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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.
Alexandria Real Estate Equities in Focus
Headquartered in Pasadena, Alexandria Real Estate Equities (ARE) is a Finance stock that has seen a price change of 23.56% so far this year. Currently paying a dividend of $1 per share, the company has a dividend yield of 2.81%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.37%, while the S&P 500's yield is 1.87%.
Looking at dividend growth, the company's current annualized dividend of $4 is up 7.2% from last year. In the past five-year period, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.92%. 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. Alexandria Real Estate Equities's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
ARE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $6.98 per share, which represents a year-over-year growth rate of 5.76%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ARE presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
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