Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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.
Essex Property Trust in Focus
Headquartered in San Mateo, Essex Property Trust (ESS) is a Finance stock that has seen a price change of 31.01% so far this year. The real estate investment trust is currently shelling out a dividend of $1.95 per share, with a dividend yield of 2.43%. This compares to the REIT and Equity Trust - Residential industry's yield of 3.09% and the S&P 500's yield of 1.96%.
Looking at dividend growth, the company's current annualized dividend of $7.80 is up 4.8% from last year. In the past five-year period, Essex Property Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.89%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Essex Property Trust's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ESS for this fiscal year. The Zacks Consensus Estimate for 2019 is $13.32 per share, which represents a year-over-year growth rate of 5.97%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 ESS 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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Essex Property Trust, Inc. (ESS) : Free Stock Analysis Report
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