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.
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 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 -34.68% 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 4.35%. This compares to the REIT and Equity Trust - Other industry's yield of 4.2% and the S&P 500's yield of 1.97%.
Looking at dividend growth, the company's current annualized dividend of $3.92 is up 2.3% from last year. Boston Properties has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 11.18%. 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. Right now, Boston Properties's payout ratio is 55%, which means it paid out 55% of its trailing 12-month EPS as dividend.
BXP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $7.16 per share, representing a year-over-year earnings growth rate of 2.14%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).