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Why EastGroup Properties (EGP) 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. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

EastGroup Properties in Focus

EastGroup Properties (EGP) is headquartered in Ridgeland, and is in the Finance sector. The stock has seen a price change of 2.05% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.75 per share, with a dividend yield of 2.22%. This compares to the REIT and Equity Trust - Other industry's yield of 4% and the S&P 500's yield of 1.68%.

Taking a look at the company's dividend growth, its current annualized dividend of $3 is up 2% 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 5.90%. 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 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for EGP for this fiscal year. The Zacks Consensus Estimate for 2020 is $5.32 per share, which represents a year-over-year growth rate of 6.83%.

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. Income investors must be conscious 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 also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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