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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Life Storage in Focus
Based in Williamsville, Life Storage (LSI) is in the Finance sector, and so far this year, shares have seen a price change of 12.89%. The self storage real estate investment trust is currently shelling out a dividend of $1 per share, with a dividend yield of 3.98%. This compares to the REIT and Equity Trust - Other industry's yield of 4.03% and the S&P 500's yield of 1.77%.
Looking at dividend growth, the company's current annualized dividend of $4 is up 1.3% from last year. Life Storage has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 14.18%. 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. Right now, Life Storage's payout ratio is 74%, which means it paid out 74% of its trailing 12-month EPS as dividend.
LSI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $5.42 per share, representing a year-over-year earnings growth rate of 2.07%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that LSI 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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Life Storage, Inc. (LSI) : Free Stock Analysis Report
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