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.
Boston Properties in Focus
Boston Properties (BXP - Free Report) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 17.73% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.95 per share, with a dividend yield of 2.87%. This compares to the REIT and Equity Trust - Other industry's yield of 4.25% and the S&P 500's yield of 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.80 is up 8.6% from last year. Boston Properties has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 7.87%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Boston Properties's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BXP for this fiscal year. The Zacks Consensus Estimate for 2019 is $6.95 per share, representing a year-over-year earnings growth rate of 10.26%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, BXP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).