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Why Alexandria Real Estate Equities (ARE) is a Great Dividend Stock Right Now

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 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 -12.92% so far this year. The life science real estate company is currently shelling out a dividend of $1.15 per share, with a dividend yield of 2.37%. This compares to the REIT and Equity Trust - Other industry's yield of 3.2% and the S&P 500's yield of 1.47%.

Looking at dividend growth, the company's current annualized dividend of $4.60 is up 2.7% from last year. Over the last 5 years, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.50%. 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. Alexandria Real Estate Equities's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.

ARE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $8.40 per share, with earnings expected to increase 8.25% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that ARE 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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