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Why Alexandria Real Estate Equities (ARE) is a Top Dividend Stock for Your Portfolio

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

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 8.53%. Currently paying a dividend of $1.09 per share, the company has a dividend yield of 2.25%. In comparison, the REIT and Equity Trust - Other industry's yield is 2.97%, while the S&P 500's yield is 1.28%.

In terms of dividend growth, the company's current annualized dividend of $4.36 is up 2.8% from last year. Over the last 5 years, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.17%. 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. Alexandria Real Estate Equities's current payout ratio is 59%, meaning it paid out 59% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ARE expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $7.75 per share, with earnings expected to increase 6.16% 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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