Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Boston Properties in Focus
Boston Properties (BXP - Free Report) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of -37.73% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.98 per share, with a dividend yield of 4.57%. This compares to the REIT and Equity Trust - Other industry's yield of 5.25% and the S&P 500's yield of 2.15%.
Looking at dividend growth, the company's current annualized dividend of $3.92 is up 2.3% from last year. Over the last 5 years, Boston Properties has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.18%. 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, Boston Properties's payout ratio is 55%, which means it paid out 55% 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 $7.22 per share, which represents a year-over-year growth rate of 3%.
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.
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 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).