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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
EastGroup Properties in Focus
Based in Ridgeland, EastGroup Properties (EGP) is in the Finance sector, and so far this year, shares have seen a price change of 4.61%. The real estate investment trust is currently shelling out a dividend of $0.72 per share, with a dividend yield of 3.12%. This compares to the REIT and Equity Trust - Other industry's yield of 4.26% and the S&P 500's yield of 1.81%.
Looking at dividend growth, the company's current annualized dividend of $2.88 is up 14.3% from last year. In the past five-year period, EastGroup Properties has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.71%. 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. EastGroup Properties's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
EGP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $4.62 per share, representing a year-over-year earnings growth rate of 8.45%.
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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that EGP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
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