All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
First Industrial Realty Trust in Focus
First Industrial Realty Trust (FR - Free Report) is headquartered in Chicago, and is in the Finance sector. The stock has seen a price change of 22.9% since the start of the year. The real estate investment trust is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 2.59% compared to the REIT and Equity Trust - Other industry's yield of 4.28% and the S&P 500's yield of 1.93%.
In terms of dividend growth, the company's current annualized dividend of $0.92 is up 5.7% from last year. First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 21.27%. 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. First Industrial Realty Trust's current payout ratio is 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.
FR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $1.70 per share, representing a year-over-year earnings growth rate of 6.25%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FR 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).