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 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
Headquartered in Chicago, First Industrial Realty Trust (FR - Free Report) is a Finance stock that has seen a price change of 33.4% so far this year. Currently paying a dividend of $0.23 per share, the company has a dividend yield of 2.39%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.34%, while the S&P 500's yield is 1.98%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.92 is up 5.7% from last year. In the past five-year period, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis 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. First Industrial Realty Trust's current payout ratio is 55%. This means it paid out 55% 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, representing a year-over-year earnings 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. But, not every company offers 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 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).