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Sun Communities (SUI) 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. 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.

Sun Communities in Focus

Sun Communities (SUI - Free Report) is headquartered in Southfield, and is in the Finance sector. The stock has seen a price change of -23.27% since the start of the year. Currently paying a dividend of $0.88 per share, the company has a dividend yield of 2.18%. In comparison, the REIT and Equity Trust - Residential industry's yield is 2.91%, while the S&P 500's yield is 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $3.52 is up 6% from last year. Sun Communities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.53%. 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. Sun Communities's current payout ratio is 54%, meaning it paid out 54% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for SUI for this fiscal year. The Zacks Consensus Estimate for 2022 is $7.30 per share, with earnings expected to increase 12.14% 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. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, SUI presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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