Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
EastGroup Properties in Focus
Headquartered in Ridgeland, EastGroup Properties (EGP) is a Finance stock that has seen a price change of 5.02% so far this year. Currently paying a dividend of $0.75 per share, the company has a dividend yield of 2.15%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.03%, while the S&P 500's yield is 1.77%.
Looking at dividend growth, the company's current annualized dividend of $3 is up 2% from last year. EastGroup Properties has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.93%. 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. EastGroup Properties's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EGP expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $5.28 per share, representing a year-over-year earnings growth rate of 6.02%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EGP 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).