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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 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.
First Industrial Realty Trust in Focus
Headquartered in Chicago, First Industrial Realty Trust (FR) is a Finance stock that has seen a price change of -3.42% so far this year. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 2.91%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.41%, while the S&P 500's yield is 1.53%.
Looking at dividend growth, the company's current annualized dividend of $1.48 is up 15.6% from last year. Over the last 5 years, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.57%. 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. First Industrial Realty Trust's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
FR is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $2.58 per share, which represents a year-over-year growth rate of 5.74%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that FR is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).