Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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.
Kilroy Realty in Focus
Based in Los Angeles, Kilroy Realty (KRC) is in the Finance sector, and so far this year, shares have seen a price change of -24.24%. The real estate investment trust is paying out a dividend of $0.49 per share at the moment, with a dividend yield of 3.05% compared to the REIT and Equity Trust - Other industry's yield of 5.91% and the S&P 500's yield of 2.3%.
In terms of dividend growth, the company's current annualized dividend of $1.94 is up 1.6% from last year. Kilroy Realty has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 8.47%. 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. Kilroy Realty's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for KRC for this fiscal year. The Zacks Consensus Estimate for 2020 is $4.11 per share, which represents a year-over-year growth rate of 5.12%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. That said, they can take comfort from the fact that KRC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).