Back to top

Image: Bigstock

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

Read MoreHide Full Article

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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

NexPoint Residential Trust Inc. In Focus

Headquartered in Dallas, NexPoint Residential Trust Inc. (NXRT - Free Report) is a Finance stock that has seen a price change of 10% so far this year. Currently paying a dividend of $0.34 per share, the company has a dividend yield of 2.93%. In comparison, the REIT and Equity Trust - Residential industry's yield is 3.36%, while the S&P 500's yield is 1.29%.

In terms of dividend growth, the company's current annualized dividend of $1.37 is up 7.1% from last year. Over the last 5 years, NexPoint Residential Trust Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.62%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, NexPoint Residential Trust Inc.'s payout ratio is 55%, which means it paid out 55% of its trailing 12-month EPS as dividend.

NXRT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $2.52 per share, representing a year-over-year earnings growth rate of 2.02%.

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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NXRT 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).


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


NexPoint Residential Trust, Inc. (NXRT) - free report >>

Published in