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.
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.
CyrusOne in Focus
Headquartered in Dallas, CyrusOne (CONE) is a Finance stock that has seen a price change of 40% so far this year. The data center operator is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 2.7% compared to the REIT and Equity Trust - Other industry's yield of 4.1% and the S&P 500's yield of 1.84%.
Taking a look at the company's dividend growth, its current annualized dividend of $2 is up 8.7% from last year. In the past five-year period, CyrusOne has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.31%. 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. CyrusOne's current payout ratio is 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.
CONE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.55 per share, which represents a year-over-year growth rate of 7.25%.
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.
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, CONE 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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CyrusOne Inc (CONE) : Free Stock Analysis Report
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