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.
Essex Property Trust in Focus
Essex Property Trust (ESS - Free Report) is headquartered in San Mateo, and is in the Finance sector. The stock has seen a price change of 18.33% since the start of the year. The real estate investment trust is currently shelling out a dividend of $1.95 per share, with a dividend yield of 2.69%. This compares to the REIT and Equity Trust - Residential industry's yield of 3.32% and the S&P 500's yield of 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $7.80 is up 4.8% from last year. In the past five-year period, Essex Property Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.16%. 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. Essex Property Trust's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ESS for this fiscal year. The Zacks Consensus Estimate for 2019 is $13.07 per share, with earnings expected to increase 3.98% from the year ago period.
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.
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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ESS 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).