All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
First Industrial Realty Trust in Focus
First Industrial Realty Trust (FR) is headquartered in Chicago, and is in the Finance sector. The stock has seen a price change of -16.5% since the start of the year. The real estate investment trust is paying out a dividend of $0.25 per share at the moment, with a dividend yield of 2.89% compared to the REIT and Equity Trust - Other industry's yield of 4.87% and the S&P 500's yield of 2.24%.
Looking at dividend growth, the company's current annualized dividend of $1 is up 8.7% from last year. In the past five-year period, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.34%. 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. Right now, First Industrial Realty Trust's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for FR for this fiscal year. The Zacks Consensus Estimate for 2020 is $1.82 per share, with earnings expected to increase 4.60% from the year ago period.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FR presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).