Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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.
Douglas Emmett in Focus
Douglas Emmett (DEI - Free Report) is headquartered in Santa Monica, and is in the Finance sector. The stock has seen a price change of 23.12% since the start of the year. Currently paying a dividend of $0.26 per share, the company has a dividend yield of 2.47%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.12%, while the S&P 500's yield is 1.91%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.04 is up 3% from last year. Douglas Emmett has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.49%. 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. Douglas Emmett's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.
DEI is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $2.10 per share, which represents a year-over-year growth rate of 4.15%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 DEI is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).