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.
Equinix in Focus
Headquartered in Redwood City, Equinix (EQIX) is a Finance stock that has seen a price change of -3.86% so far this year. Currently paying a dividend of $4.69 per share, the company has a dividend yield of 2.07%. In comparison, the REIT and Equity Trust - Retail industry's yield is 4.24%, while the S&P 500's yield is 1.6%.
In terms of dividend growth, the company's current annualized dividend of $18.76 is up 10.1% from last year. In the past five-year period, Equinix has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.07%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm'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 $37.82 per share, which represents a year-over-year growth rate of 8%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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. That said, they can take comfort from the fact that EQIX is not only an attractive dividend play, but also represents a compelling investment opportunity with a 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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