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Why Alexandria Real Estate Equities (ARE) is a Great Dividend Stock Right Now
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Alexandria Real Estate Equities in Focus
Alexandria Real Estate Equities (ARE - Free Report) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of -4.69% since the start of the year. Currently paying a dividend of $1.21 per share, the company has a dividend yield of 3.49%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.55%, while the S&P 500's yield is 1.7%.
In terms of dividend growth, the company's current annualized dividend of $4.84 is up 2.5% from last year. Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.07%. 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, Alexandria Real Estate Equities's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.
ARE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $8.94 per share, with earnings expected to increase 6.18% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that ARE is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).