This Is Why Highwoods Properties (HIW) Is A Great Dividend Stock

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Highwoods Properties in Focus

Headquartered in Raleigh, Highwoods Properties (HIW) is a Finance stock that has seen a price change of -42.4% so far this year. The real estate investment trust is currently shelling out a dividend of $0.48 per share, with a dividend yield of 6.82%. This compares to the REIT and Equity Trust - Other industry's yield of 5.36% and the S&P 500's yield of 2.79%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.92 is up 1.1% from last year. Over the last 5 years, Highwoods Properties has increased its dividend 3 times on a year-over-year basis for an average annual increase of 3%. 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. Highwoods Properties's current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.

HIW is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $3.63 per share, with earnings expected to increase 9.01% 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. 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. That said, they can take comfort from the fact that HIW is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).