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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.

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 1.44% since the start of the year. Currently paying a dividend of $1.27 per share, the company has a dividend yield of 3.95%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.55%, while the S&P 500's yield is 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $5.08 is up 2.4% from last year. In the past five-year period, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.57%. 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. Alexandria Real Estate Equities's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ARE expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $9.47 per share, representing a year-over-year earnings growth rate of 5.57%.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.