Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
SL Green in Focus
SL Green (SLG - Free Report) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 2.67% since the start of the year. The commercial real estate investment trust is paying out a dividend of $0.85 per share at the moment, with a dividend yield of 4.19% compared to the REIT and Equity Trust - Other industry's yield of 4.37% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $3.40 is up 3.4% from last year. Over the last 5 years, SL Green has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.78%. 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. Right now, SL Green's payout ratio is 50%, which means it paid out 50% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SLG expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $6.91 per share, which represents a year-over-year growth rate of 4.38%.
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.
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, SLG 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).