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This is Why CTO Realty (CTO) is a Great Dividend Stock

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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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

CTO Realty in Focus

Based in Daytona Beach, CTO Realty (CTO - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 3.55%. The real estate company is currently shelling out a dividend of $0.37 per share, with a dividend yield of 7.04%. This compares to the REIT and Equity Trust - Other industry's yield of 3.83% and the S&P 500's yield of 1.6%.

Looking at dividend growth, the company's current annualized dividend of $1.49 is up 11.8% from last year. In the past five-year period, CTO Realty has increased its dividend 5 times on a year-over-year basis for an average annual increase of 124.05%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. CTO Realty's current payout ratio is 54%. This means it paid out 54% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, CTO expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $1.77 per share, with earnings expected to increase 22.07% 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. However, not all companies offer 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. 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, CTO 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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