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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Boston Properties in Focus
Based in Boston, Boston Properties (BXP - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -23.23%. Currently paying a dividend of $0.98 per share, the company has a dividend yield of 3.7%. In comparison, the REIT and Equity Trust - Other industry's yield is 5.36%, while the S&P 500's yield is 2.51%.
In terms of dividend growth, the company's 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%, meaning 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 $7.55 per share, representing a year-over-year earnings growth rate of 7.70%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. 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, BXP 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).