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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Mid-America Apartment Communities in Focus
Headquartered in Germantown, Mid-America Apartment Communities (MAA) is a Finance stock that has seen a price change of -21.11% so far this year. The real estate investment trust is paying out a dividend of $1.09 per share at the moment, with a dividend yield of 2.4% compared to the REIT and Equity Trust - Residential industry's yield of 2.88% and the S&P 500's yield of 1.55%.
Looking at dividend growth, the company's current annualized dividend of $4.35 is up 6.1% from last year. Mid-America Apartment Communities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.19%. 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. Mid-America Apartment Communities's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
MAA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $8.17 per share, with earnings expected to increase 16.55% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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 MAA 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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MidAmerica Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
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