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This is Why Mid-America Apartment Communities (MAA) is a Great Dividend Stock

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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.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

Mid-America Apartment Communities in Focus

Based in Germantown, Mid-America Apartment Communities (MAA - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -22.08%. The real estate investment trust is currently shelling out a dividend of $1.25 per share, with a dividend yield of 2.8%. This compares to the REIT and Equity Trust - Residential industry's yield of 2.83% and the S&P 500's yield of 1.62%.

Looking at dividend growth, the company's current annualized dividend of $5 is up 22% from last year. Mid-America Apartment Communities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.22%. 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. Mid-America Apartment Communities's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for MAA for this fiscal year. The Zacks Consensus Estimate for 2022 is $8.24 per share, which represents a year-over-year growth rate of 17.55%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 have to be mindful 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 MAA 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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