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 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.
SL Green in Focus
SL Green (SLG - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 16.63% since the start of the year. The commercial real estate investment trust is currently shelling out a dividend of $0.85 per share, with a dividend yield of 3.69%. This compares to the REIT and Equity Trust - Other industry's yield of 4.41% and the S&P 500's yield of 1.97%.
Looking at dividend growth, the company's current annualized dividend of $3.40 is up 3.4% from last year. Over the last 5 years, SL Green has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.97%. 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. SL Green's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
SLG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $6.92 per share, with earnings expected to increase 4.53% from the year ago period.
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.
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. With that in mind, SLG 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).