Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Boston Properties in Focus
Headquartered in Boston, Boston Properties (BXP - Free Report) is a Finance stock that has seen a price change of -40.02% so far this year. The real estate investment trust is currently shelling out a dividend of $0.98 per share, with a dividend yield of 4.74%. This compares to the REIT and Equity Trust - Other industry's yield of 5.91% and the S&P 500's yield of 2.5%.
Looking at dividend growth, the company's current annualized dividend of $3.92 is up 2.3% from last year. In the past five-year period, Boston Properties has increased its dividend 4 times on a year-over-year basis 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%. This means it paid out 56% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BXP expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $7.45 per share, with earnings expected to increase 6.28% from the year ago period.
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).