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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
First Industrial Realty Trust in Focus
Based in Chicago, First Industrial Realty Trust (FR) is in the Finance sector, and so far this year, shares have seen a price change of 11.63%. The real estate investment trust is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 2.3% compared to the REIT and Equity Trust - Other industry's yield of 3.16% and the S&P 500's yield of 1.29%.
In terms of dividend growth, the company's current annualized dividend of $1.08 is up 8% from last year. In the past five-year period, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.69%. 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. First Industrial Realty Trust's current payout ratio is 54%, meaning it paid out 54% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FR for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.91 per share, which represents a year-over-year growth rate of 3.80%.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FR is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).