Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Equity Lifestyle Properties in Focus
Based in Chicago, Equity Lifestyle Properties (ELS) is in the Finance sector, and so far this year, shares have seen a price change of 1.73%. Currently paying a dividend of $0.41 per share, the company has a dividend yield of 2.72%. In comparison, the REIT and Equity Trust - Residential industry's yield is 3.98%, while the S&P 500's yield is 1.73%.
Looking at dividend growth, the company's current annualized dividend of $1.79 is up 9.1% from last year. In the past five-year period, Equity Lifestyle Properties has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.76%. 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. Equity Lifestyle Properties's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ELS for this fiscal year. The Zacks Consensus Estimate for 2023 is $2.85 per share, which represents a year-over-year growth rate of 4.78%.
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.
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. That said, they can take comfort from the fact that ELS is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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