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This is Why Highwoods Properties (HIW) is a Great Dividend Stock

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.

Highwoods Properties in Focus

Based in Raleigh, Highwoods Properties (HIW) is in the Finance sector, and so far this year, shares have seen a price change of -21.71%. Currently paying a dividend of $0.48 per share, the company has a dividend yield of 5.01%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.08%, while the S&P 500's yield is 1.99%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.92 is up 1.1% from last year. Highwoods Properties has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 3.14%. 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. Right now, Highwoods Properties's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, HIW expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $3.58 per share, which represents a year-over-year growth rate of 7.51%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. With that in mind, HIW 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).


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