Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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

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 12.97%. The life science real estate company is currently shelling out a dividend of $1.12 per share, with a dividend yield of 2.23%. This compares to the REIT and Equity Trust - Other industry's yield of 2.78% and the S&P 500's yield of 1.38%.

In terms of dividend growth, the company's current annualized dividend of $4.48 is up 5.7% 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 7.12%. 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 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for ARE for this fiscal year. The Zacks Consensus Estimate for 2021 is $7.78 per share, which represents a year-over-year growth rate of 6.58%.

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. Income investors must be conscious 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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