All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
SL Green in Focus
Based in New York, SL Green (SLG-Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 0.93%. The commercial real estate investment trust is paying out a dividend of $0.88 per share at the moment, with a dividend yield of 3.82% compared to the REIT and Equity Trust - Other industry's yield of 4.24% and the S&P 500's yield of 1.77%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.54 is up 3.1% from last year. SL Green has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.75%. 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. SL Green's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, SLG expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $7.18 per share, with earnings expected to increase 2.57% from the year ago period.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, SLG presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).