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Why Highwoods Properties (HIW) 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 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.

Highwoods Properties in Focus

Based in Raleigh, Highwoods Properties (HIW - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -4.4%. The real estate investment trust is currently shelling out a dividend of $0.5 per share, with a dividend yield of 4.69%. This compares to the REIT and Equity Trust - Other industry's yield of 3.18% and the S&P 500's yield of 1.47%.

Looking at dividend growth, the company's current annualized dividend of $2 is up 2% from last year. Highwoods Properties has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 2.51%. 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. Right now, Highwoods Properties's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, HIW expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.86 per share, which represents a year-over-year growth rate of 2.39%.

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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HIW 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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