Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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.
Regency Centers in Focus
Based in Jacksonville, Regency Centers (REG - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 17.33%. The shopping center real estate investment trust is currently shelling out a dividend of $0.58 per share, with a dividend yield of 3.4%. This compares to the REIT and Equity Trust - Retail industry's yield of 5.23% and the S&P 500's yield of 1.88%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.34 is up 5.4% from last year. Regency Centers has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.69%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Regency Centers's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
REG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $3.84 per share, representing a year-over-year earnings growth rate of 0.26%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. 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, REG 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).