Why Highwoods Properties (HIW) is a Top Dividend Stock for Your Portfolio
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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.
Highwoods Properties in Focus
Based in Raleigh, Highwoods Properties (HIW) is in the Finance sector, and so far this year, shares have seen a price change of -23.92%. The real estate investment trust is currently shelling out a dividend of $0.48 per share, with a dividend yield of 5.16%. This compares to the REIT and Equity Trust - Other industry's yield of 5.06% and the S&P 500's yield of 2.03%.
Looking at dividend growth, the company's current annualized dividend of $1.92 is up 1.1% from last year. In the past five-year period, Highwoods Properties has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.14%. 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. Right now, Highwoods Properties's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HIW for this fiscal year. The Zacks Consensus Estimate for 2020 is $3.57 per share, with earnings expected to increase 7.21% 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.
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, HIW 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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