Alexandria Real Estate Equities is a Top Dividend Stock Right Now: Should You Buy?

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.

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 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

Based in Pasadena, Alexandria Real Estate Equities ARE is in the Finance sector, and so far this year, shares have seen a price change of -8.19%. Currently paying a dividend of $1.27 per share, the company has a dividend yield of 4.47%. In comparison, the REIT and Equity Trust - Other industry's yield is 4.66%, while the S&P 500's yield is 1.62%.

Looking at dividend growth, the company's current annualized dividend of $5.20 is up 4.8% from last year. Over the last 5 years, Alexandria Real Estate Equities has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.41%. 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. Alexandria Real Estate Equities's current payout ratio is 56%. This means it paid out 56% 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 $9.49 per share, with earnings expected to increase 5.80% 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. But, not every company offers 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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