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Why Alexandria Real Estate Equities (ARE) is a Great Dividend Stock Right Now

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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.

Alexandria Real Estate Equities in Focus

Based in Pasadena, Alexandria Real Estate Equities (ARE - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 9.88%. Currently paying a dividend of $1.06 per share, the company has a dividend yield of 2.39%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.39%, while the S&P 500's yield is 1.83%.

Looking at dividend growth, the company's current annualized dividend of $4.24 is up 6% from last year. Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.25%. 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, Alexandria Real Estate Equities's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.

ARE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $7.32 per share, with earnings expected to increase 5.17% from the year ago period.

Bottom Line

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.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 ARE 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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