Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
First Industrial Realty Trust in Focus
Based in Chicago, First Industrial Realty Trust (FR - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 6.22%. The real estate investment trust is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.27%. This compares to the REIT and Equity Trust - Other industry's yield of 4.39% and the S&P 500's yield of 1.83%.
Looking at dividend growth, the company's current annualized dividend of $1 is up 8.7% from last year. Over the last 5 years, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.76%. 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, First Industrial Realty Trust's payout ratio is 56%, which means it paid out 56% of its trailing 12-month EPS as dividend.
FR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $1.80 per share, representing a year-over-year earnings growth rate of 3.45%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).