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.
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 33.13% 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 2.39%. This compares to the REIT and Equity Trust - Other industry's yield of 4.26% and the S&P 500's yield of 1.93%.
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%. 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, First Industrial Realty Trust's payout ratio is 55%, which means it paid out 55% 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, which represents a year-over-year growth rate of 6.88%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that FR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).