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.
First Industrial Realty Trust in Focus
Based in Chicago, First Industrial Realty Trust (FR - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -17.97%. The real estate investment trust is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.94%. This compares to the REIT and Equity Trust - Other industry's yield of 4.61% and the S&P 500's yield of 2.2%.
Looking at dividend growth, the company's current annualized dividend of $1 is up 8.7% from last year. First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.34%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. First Industrial Realty Trust'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, FR expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $1.78 per share, which represents a year-over-year growth rate of 2.30%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FR 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).