Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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.
Boston Properties in Focus
Based in Boston, Boston Properties (BXP - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 15.81%. The real estate investment trust is currently shelling out a dividend of $0.95 per share, with a dividend yield of 2.92%. This compares to the REIT and Equity Trust - Other industry's yield of 4.29% and the S&P 500's yield of 1.89%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.80 is up 8.6% from last year. In the past five-year period, Boston Properties has increased its dividend 3 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, Boston Properties's payout ratio is 58%, which means it paid out 58% of its trailing 12-month EPS as dividend.
BXP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $7 per share, which represents a year-over-year growth rate of 11.11%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BXP 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).