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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Douglas Emmett in Focus
Douglas Emmett (DEI) is headquartered in Santa Monica, and is in the Finance sector. The stock has seen a price change of -13.18% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.25 per share, with a dividend yield of 2.81%. 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%.
Looking at dividend growth, the company's current annualized dividend of $1 is up 6.4% from last year. Over the last 5 years, Douglas Emmett has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.31%. 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. Douglas Emmett's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for DEI for this fiscal year. The Zacks Consensus Estimate for 2018 is $2.02 per share, which represents a year-over-year growth rate of 6.32%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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, DEI 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).