Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Alexandria Real Estate Equities in Focus
Alexandria Real Estate Equities (ARE) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of -7.27% since the start of the year. The life science real estate company is currently shelling out a dividend of $0.93 per share, with a dividend yield of 3.07%. This compares to the REIT and Equity Trust - Other industry's yield of 4.51% and the S&P 500's yield of 2.02%.
In terms of dividend growth, the company's current annualized dividend of $3.72 is up 7.8% from last year. Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.53%. 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. Alexandria Real Estate Equities's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ARE expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $6.61 per share, with earnings expected to increase 9.80% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. That said, they can take comfort from the fact that ARE is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.