Technology

Essex Property Trust (ESS) is a Top Dividend Stock Right Now: Should You Buy?

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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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.

Essex Property Trust in Focus

Headquartered in San Mateo, Essex Property Trust (ESS) is a Finance stock that has seen a price change of 18.33% so far this year. Currently paying a dividend of $1.86 per share, the company has a dividend yield of 2.69%. In comparison, the REIT and Equity Trust - Residential industry's yield is 3.34%, while the S&P 500's yield is 1.93%.

In terms of dividend growth, the company's current annualized dividend of $7.80 is up 4.8% from last year. Essex Property Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.62%. 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, Essex Property Trust's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.

ESS is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $13.07 per share, representing a year-over-year earnings growth rate of 3.98%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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, ESS 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).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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