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.
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.
Equinix in Focus
Based in Redwood City, Equinix (EQIX) is in the Finance sector, and so far this year, shares have seen a price change of -7.16%. The data center operator is paying out a dividend of $4.69 per share at the moment, with a dividend yield of 2.14% compared to the REIT and Equity Trust - Retail industry's yield of 4.41% and the S&P 500's yield of 1.62%.
In terms of dividend growth, the company's current annualized dividend of $18.76 is up 10.1% 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 13.07%. 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, Equinix's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
EQIX is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $37.60 per share, with earnings expected to increase 7.37% 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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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Equinix, Inc. (EQIX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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