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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. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
CyrusOne in Focus
CyrusOne (CONE) is headquartered in Dallas, and is in the Finance sector. The stock has seen a price change of 0.86% since the start of the year. The data center operator is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 3.03% compared to the REIT and Equity Trust - Other industry's yield of 4.03% and the S&P 500's yield of 1.78%.
Looking at dividend growth, the company's current annualized dividend of $2 is up 4.2% 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 10.55%. 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 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CONE expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $3.97 per share, representing a year-over-year earnings growth rate of 9.37%.
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.
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. 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 CONE is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).