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Why First Industrial Realty Trust (FR) is a Great Dividend Stock Right Now

Zacks Equity Research

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Industrial Realty Trust in Focus

Headquartered in Chicago, First Industrial Realty Trust (FR) is a Finance stock that has seen a price change of -7.56% so far this year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.61%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.23%, while the S&P 500's yield is 1.92%.

Taking a look at the company's dividend growth, its current annualized dividend of $1 is up 8.7% from last year. First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.76%. 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 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FR for this fiscal year. The Zacks Consensus Estimate for 2020 is $1.78 per share, representing a year-over-year earnings growth rate of 2.30%.

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. It's important to keep in mind that not all companies provide 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 FR 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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Zacks Investment Research