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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
UDR in Focus
UDR (UDR) is headquartered in Highlands Ranch, and is in the Finance sector. The stock has seen a price change of -5.11% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.32 per share, with a dividend yield of 3.53%. This compares to the REIT and Equity Trust - Residential industry's yield of 3.7% and the S&P 500's yield of 1.8%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.29 is up 5.3% from last year. Over the last 5 years, UDR has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.71%. 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. UDR's current payout ratio is 66%, meaning it paid out 66% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for UDR for this fiscal year. The Zacks Consensus Estimate for 2018 is $1.93 per share, with earnings expected to increase 3.21% from the year ago period.
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. 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 UDR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).