All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 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 -20.48%. The real estate investment trust is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 3.21% compared to the REIT and Equity Trust - Other industry's yield of 4.41% and the S&P 500's yield of 2.31%.
Looking at dividend growth, the company's current annualized dividend of $1.12 is up 5.7% from last year. In the past five-year period, Douglas Emmett has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.89%. 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 53%. This means it paid out 53% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, DEI expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.26 per share, with earnings expected to increase 7.62% 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.
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, DEI 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).