All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
Alexandria Real Estate Equities in Focus
Headquartered in Pasadena, Alexandria Real Estate Equities (ARE - Free Report) is a Finance stock that has seen a price change of 27.08% so far this year. The life science real estate company is currently shelling out a dividend of $1 per share, with a dividend yield of 2.73%. This compares to the REIT and Equity Trust - Other industry's yield of 4.26% and the S&P 500's yield of 1.91%.
Looking at dividend growth, the company's current annualized dividend of $4 is up 7.2% from last year. In the past five-year period, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.92%. 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, Alexandria Real Estate Equities's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ARE expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $6.98 per share, with earnings expected to increase 5.76% from the year ago period.
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.
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. 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, ARE presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).