All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Sotherly Hotels in Focus
Sotherly Hotels (SOHO) is headquartered in Williamsburg, and is in the Finance sector. The stock has seen a price change of 5.12% since the start of the year. The real estate investment trust is paying out a dividend of $0.13 per share at the moment, with a dividend yield of 7.37% compared to the REIT and Equity Trust - Other industry's yield of 4.51% and the S&P 500's yield of 1.95%.
In terms of dividend growth, the company's current annualized dividend of $0.50 is up 17.6% from last year. In the past five-year period, Sotherly Hotels has increased its dividend 5 times on a year-over-year basis for an average annual increase of 22.80%. 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. Sotherly Hotels's current payout ratio is 40%, meaning it paid out 40% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SOHO expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $1.04 per share, which represents a year-over-year growth rate of 4%.
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 SOHO 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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Sotherly Hotels Inc. (SOHO) : Free Stock Analysis Report
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