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Alexandria Real Estate Equities (ARE) is a Top Dividend Stock Right Now: Should You Buy?

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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 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

Headquartered in Pasadena, Alexandria Real Estate Equities (ARE - Free Report) is a Finance stock that has seen a price change of -11.15% so far this year. Currently paying a dividend of $1.09 per share, the company has a dividend yield of 2.75%. In comparison, the REIT and Equity Trust - Other industry's yield is 3.41%, while the S&P 500's yield is 1.39%.

Looking at dividend growth, the company's current annualized dividend of $4.36 is up 2.8% 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 7.19%. 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. Right now, Alexandria Real Estate Equities's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.

ARE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $7.73 per share, which represents a year-over-year growth rate of 5.89%.

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. But, not every company offers 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. With that in mind, ARE is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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