Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
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 30.08% since the start of the year. The real estate investment trust is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.45% compared to the REIT and Equity Trust - Other industry's yield of 4.33% and the S&P 500's yield of 1.89%.
In terms of dividend growth, the company's current annualized dividend of $0.92 is up 5.7% from last year. First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 18.46%. 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. First Industrial Realty Trust's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FR for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.71 per share, which represents a year-over-year growth rate of 6.88%.
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.
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).