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.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
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 19.75% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.23 per share, with a dividend yield of 2.66%. This compares to the REIT and Equity Trust - Other industry's yield of 4.21% and the S&P 500's yield of 2.03%.
Looking at dividend growth, the company's current annualized dividend of $0.92 is up 5.7% from last year. In the past five-year period, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 20.15%. 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. First Industrial Realty Trust's current payout ratio is 57%. This means it paid out 57% 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 $1.71 per share, with earnings expected to increase 6.88% from the year ago period.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FR 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).