All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 24.64% since the start of the year. The real estate investment trust is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.56% compared to the REIT and Equity Trust - Other industry's yield of 4.19% and the S&P 500's yield of 1.89%.
Looking at 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 20.15%. 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. First Industrial Realty Trust's current payout ratio is 55%. This means 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, which represents a year-over-year growth rate of 6.25%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 FR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).