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.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 20.74% since the start of the year. Currently paying a dividend of $0.95 per share, the company has a dividend yield of 2.8%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.26%, while the S&P 500's yield is 1.9%.
Looking at dividend growth, the company's 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 8.95%. 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. 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 $6.93 per share, with earnings expected to increase 10% 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. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BXP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).