Why Alexandria Real Estate Equities (ARE) is a Great Dividend Stock Right Now

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Alexandria Real Estate Equities in Focus

Alexandria Real Estate Equities (ARE) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of -26.73% since the start of the year. The life science real estate company is currently shelling out a dividend of $1.15 per share, with a dividend yield of 2.82%. This compares to the REIT and Equity Trust - Other industry's yield of 3.46% and the S&P 500's yield of 1.55%.

Looking at dividend growth, the company's current annualized dividend of $4.60 is up 2.7% from last year. Over the last 5 years, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.50%. 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. Alexandria Real Estate Equities's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ARE expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $8.40 per share, with earnings expected to increase 8.25% from the year ago period.

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.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, ARE 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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