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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Equity Lifestyle Properties in Focus
Equity Lifestyle Properties (ELS - Free Report) is headquartered in Chicago, and is in the Finance sector. The stock has seen a price change of 19.3% since the start of the year. The resort community operator is paying out a dividend of $0.61 per share at the moment, with a dividend yield of 2.11% compared to the REIT and Equity Trust - Residential industry's yield of 3.3% and the S&P 500's yield of 1.9%.
In terms of dividend growth, the company's current annualized dividend of $2.45 is up 11.4% from last year. In the past five-year period, Equity Lifestyle Properties has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.93%. 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. Equity Lifestyle Properties's current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.
ELS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.18 per share, representing a year-over-year earnings growth rate of 8.01%.
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.
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 ELS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).