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 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.
EastGroup Properties in Focus
Headquartered in Ridgeland, EastGroup Properties (EGP) is a Finance stock that has seen a price change of 6.53% so far this year. The real estate investment trust is currently shelling out a dividend of $0.64 per share, with a dividend yield of 2.72%. This compares to the REIT and Equity Trust - Other industry's yield of 4.13% and the S&P 500's yield of 1.78%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.56 is up 1.6% 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 4.16%. 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%. This means 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 $4.59 per share, with earnings expected to increase 7.75% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EGP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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EastGroup Properties, Inc. (EGP) : Free Stock Analysis Report
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