Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Corporate Office Properties in Focus
Headquartered in Columbia, Corporate Office Properties is a Finance stock that has seen a price change of -10.29% so far this year. The real estate investment trust specializing in suburban office properties is currently shelling out a dividend of $0.28 per share, with a dividend yield of 4.9%. This compares to the REIT and Equity Trust - Other industry's yield of 4.76% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.14 is up 3.6% from last year. Corporate Office Properties has increased its dividend 1 times on a year-over-year basis over the last 5 years for an average annual increase of 0.20%. 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. Right now, Corporate Office Properties's payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for OFC for this fiscal year. The Zacks Consensus Estimate for 2023 is $2.39 per share, which represents a year-over-year growth rate of 1.27%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, OFC 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).