Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Essex Property Trust in Focus
Essex Property Trust (ESS) is headquartered in San Mateo, and is in the Finance sector. The stock has seen a price change of -25.05% since the start of the year. The real estate investment trust is paying out a dividend of $1.95 per share at the moment, with a dividend yield of 3.68% compared to the REIT and Equity Trust - Residential industry's yield of 5.11% and the S&P 500's yield of 2.3%.
Looking at dividend growth, the company's current annualized dividend of $8.31 is up 6.5% from last year. In the past five-year period, Essex Property Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.56%. 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. Essex Property Trust's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ESS for this fiscal year. The Zacks Consensus Estimate for 2020 is $13.94 per share, which represents a year-over-year growth rate of 4.19%.
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.
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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ESS 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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Essex Property Trust, Inc. (ESS) : Free Stock Analysis Report
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