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.
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 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
Based in Chicago, First Industrial Realty Trust (FR) is in the Finance sector, and so far this year, shares have seen a price change of 10.82%. Currently paying a dividend of $0.32 per share, the company has a dividend yield of 2.39%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.72%, while the S&P 500's yield is 1.74%.
Looking at dividend growth, the company's current annualized dividend of $1.28 is up 8.5% from last year. In the past five-year period, First Industrial Realty Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.21%. 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. First Industrial Realty Trust's current payout ratio is 54%, meaning it paid out 54% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, FR expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $2.42 per share, representing a year-over-year earnings growth rate of 6.14%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FR 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).
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