Equinix Could Be a Great Choice

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.

Equinix in Focus

Headquartered in Redwood City, Equinix EQIX is a Finance stock that has seen a price change of -4.48% so far this year. Currently paying a dividend of $4.26 per share, the company has a dividend yield of 2.21%. In comparison, the REIT and Equity Trust - Retail industry's yield is 4.23%, while the S&P 500's yield is 1.58%.

Looking at dividend growth, the company's current annualized dividend of $17.04 is up 17.6% from last year. Over the last 5 years, Equinix has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.52%. 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. Right now, Equinix's payout ratio is 53%, which means it paid out 53% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for EQIX for this fiscal year. The Zacks Consensus Estimate for 2024 is $34.98 per share, with earnings expected to increase 8.94% 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. 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. With that in mind, EQIX presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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