All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.
Camden in Focus
Camden (CPT) is headquartered in Houston, and is in the Finance sector. The stock has seen a price change of -1.08% since the start of the year. The real estate investment trust is paying out a dividend of $0.77 per share at the moment, with a dividend yield of 3.38% compared to the REIT and Equity Trust – Residential industry's yield of 3.7% and the S&P 500's yield of 1.79%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.08 is up 2.7% from last year. Over the last 5 years, Camden has increased its dividend 4 times on a year-over-year basis for an average annual increase of 4.45%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Camden's current payout ratio is 67%, meaning it paid out 67% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CPT expects solid earnings growth. The Zacks Consensus Estimate for 2018 is $4.74 per share, representing a year-over-year earnings growth rate of 4.64%.
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.
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 have to be mindful 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 CPT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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