All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Douglas Emmett in Focus
Based in Santa Monica, Douglas Emmett (DEI - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 27.89%. Currently paying a dividend of $0.26 per share, the company has a dividend yield of 2.38%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.1%, while the S&P 500's yield is 1.87%.
Looking at dividend growth, the company's current annualized dividend of $1.04 is up 3% from last year. Over the last 5 years, Douglas Emmett has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.49%. 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. Douglas Emmett's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, DEI expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.11 per share, with earnings expected to increase 4.46% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that DEI is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).