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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Boston Properties in Focus
Headquartered in Boston, Boston Properties (BXP) is a Finance stock that has seen a price change of 5.6% so far this year. The real estate investment trust is paying out a dividend of $0.98 per share at the moment, with a dividend yield of 2.69% compared to the REIT and Equity Trust - Other industry's yield of 4.03% and the S&P 500's yield of 1.78%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.92 is up 2.3% from last year. Boston Properties has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 10.91%. 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. Boston Properties's current payout ratio is 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.
BXP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $7.59 per share, with earnings expected to increase 8.27% from the year ago period.
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. 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 BXP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).