Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Boston Properties in Focus
Boston Properties (BXP - Free Report) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 15.08% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.95 per share, with a dividend yield of 2.93%. This compares to the REIT and Equity Trust - Other industry's yield of 4.07% and the S&P 500's yield of 1.9%.
Looking at dividend growth, the company's current annualized dividend of $3.80 is up 8.6% from last year. Boston Properties has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 9.78%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Boston Properties's current payout ratio is 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BXP for this fiscal year. The Zacks Consensus Estimate for 2019 is $7 per share, representing a year-over-year earnings 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.
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. 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).