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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Alexandria Real Estate Equities in Focus
Alexandria Real Estate Equities (ARE - Free Report) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of 34.7% since the start of the year. The life science real estate company is currently shelling out a dividend of $1 per share, with a dividend yield of 2.58%. This compares to the REIT and Equity Trust - Other industry's yield of 4.07% and the S&P 500's yield of 1.88%.
Taking a look at the company's dividend growth, its 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.
ARE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $6.98 per share, which represents a year-over-year growth rate of 5.76%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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, 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).