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.
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.
CyrusOne in Focus
Headquartered in Dallas, CyrusOne (CONE - Free Report) is a Finance stock that has seen a price change of -23.41% so far this year. The data center operator is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 3.99% compared to the REIT and Equity Trust - Other industry's yield of 6.97% and the S&P 500's yield of 2.52%.
In terms of dividend growth, the company's current annualized dividend of $2 is up 4.2% from last year. In the past five-year period, CyrusOne has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.55%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. CyrusOne's current payout ratio is 55%. This means it paid out 55% of its trailing 12-month EPS as dividend.
CONE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.85 per share, which represents a year-over-year growth rate of 6.06%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CONE 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).