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Why Alexandria Real Estate Equities (ARE) is a Great Dividend Stock Right Now

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

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 -4.91% since the start of the year. The life science real estate company is paying out a dividend of $1.27 per share at the moment, with a dividend yield of 4.21% compared to the REIT and Equity Trust - Other industry's yield of 4.67% and the S&P 500's yield of 1.58%.

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In terms of dividend growth, the company's current annualized dividend of $5.08 is up 2.4% from last year. Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.41%. 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 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for ARE for this fiscal year. The Zacks Consensus Estimate for 2024 is $9.49 per share, which represents a year-over-year growth rate of 5.80%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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