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NexPoint Residential Trust Inc. (NXRT) is a Top Dividend Stock Right Now: Should You Buy?

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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

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 50.91%. The real estate investment trust is currently shelling out a dividend of $0.34 per share, with a dividend yield of 2.14%. This compares to the REIT and Equity Trust - Residential industry's yield of 2.96% and the S&P 500's yield of 1.4%.

In terms of dividend growth, the company's current annualized dividend of $1.37 is up 7.1% from last year. In the past five-year period, NexPoint Residential Trust Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.18%. 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. NexPoint Residential Trust Inc.'s current payout ratio is 54%. This means it paid out 54% 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 $2.64 per share, with earnings expected to increase 6.88% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that NXRT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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