Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Equinix in Focus
Based in Redwood City, Equinix (EQIX) is in the Finance sector, and so far this year, shares have seen a price change of -13.22%. The data center operator is paying out a dividend of $2.66 per share at the moment, with a dividend yield of 2.1% compared to the REIT and Equity Trust - Retail industry's yield of 6.35% and the S&P 500's yield of 2.79%.
Looking at dividend growth, the company's current annualized dividend of $10.64 is up 8.1% from last year. In the past five-year period, Equinix has increased its dividend 5 times on a year-over-year basis for an average annual increase of 23.66%. 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. Right now, Equinix's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EQIX expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $24.77 per share, which represents a year-over-year growth rate of 8.59%.
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.
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, EQIX 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).