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Why Sun Communities (SUI) 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. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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 -28.13% since the start of the year. The real estate investment trust is paying out a dividend of $0.88 per share at the moment, with a dividend yield of 2.33% compared to the REIT and Equity Trust - Residential industry's yield of 2.82% and the S&P 500's yield of 1.66%.

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

SUI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.30 per share, which represents a year-over-year growth rate of 12.14%.

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.

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. 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, SUI 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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