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Why NexPoint Residential Trust Inc. (NXRT) is a Top Dividend Stock for Your Portfolio

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

NexPoint Residential Trust Inc. In Focus

Based in Dallas, NexPoint Residential Trust Inc. (NXRT - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -1.23%. The real estate investment trust is currently shelling out a dividend of $0.34 per share, with a dividend yield of 3.27%. This compares to the REIT and Equity Trust - Residential industry's yield of 3.56% and the S&P 500's yield of 1.43%.

Looking at dividend growth, the company's current annualized dividend of $1.37 is up 7.1% from last year. NexPoint Residential Trust Inc. has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.33%. 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. NexPoint Residential Trust Inc.'s current payout ratio is 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for NXRT for this fiscal year. The Zacks Consensus Estimate for 2021 is $2.58 per share, representing a year-over-year earnings growth rate of 4.45%.

Bottom Line

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, NXRT 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).


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