Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 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.
Kilroy Realty in Focus
Headquartered in Los Angeles, Kilroy Realty (KRC - Free Report) is a Finance stock that has seen a price change of 21.69% so far this year. Currently paying a dividend of $0.46 per share, the company has a dividend yield of 2.38%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.22%, while the S&P 500's yield is 1.95%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.82 is up 1.7% from last year. Over the last 5 years, Kilroy Realty has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.16%. 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. Kilroy Realty's current payout ratio is 52%. This means it paid out 52% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, KRC expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.70 per share, which represents a year-over-year growth rate of 6.32%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. 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, KRC 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).