Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Simon Property in Focus
Headquartered in Indianapolis, Simon Property (SPG - Free Report) is a Finance stock that has seen a price change of 0.79% so far this year. The shopping mall real estate investment trust is paying out a dividend of $2 per share at the moment, with a dividend yield of 4.62% compared to the REIT and Equity Trust - Retail industry's yield of 5.07% and the S&P 500's yield of 1.77%.
In terms of dividend growth, the company's current annualized dividend of $8 is up 11.9% from last year. In the past five-year period, Simon Property has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.10%. 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. Simon Property's current payout ratio is 66%. This means it paid out 66% of its trailing 12-month EPS as dividend.
SPG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $12.09 per share, which represents a year-over-year growth rate of 7.85%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 SPG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).