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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
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 -3.99% so far this year. The life science real estate company is paying out a dividend of $1.03 per share at the moment, with a dividend yield of 2.66% compared to the REIT and Equity Trust - Other industry's yield of 5.06% and the S&P 500's yield of 1.98%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.12 is up 3% 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 7.06%. Looking ahead, future dividend growth will be dependent on earnings growth and 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%, meaning 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 2020 is $7.27 per share, which represents a year-over-year growth rate of 4.45%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ARE 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research