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Why Boston Properties (BXP) is a Great Dividend Stock Right Now

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Boston Properties in Focus

Boston Properties (BXP) is headquartered in Boston, and is in the Finance sector. The stock has seen a price change of 14.62% since the start of the year. The real estate investment trust is currently shelling out a dividend of $0.95 per share, with a dividend yield of 2.95%. This compares to the REIT and Equity Trust - Other industry's yield of 4.19% and the S&P 500's yield of 1.91%.

Looking at dividend growth, the company's current annualized dividend of $3.80 is up 8.6% from last year. In the past five-year period, Boston Properties has increased its dividend 3 times on a year-over-year basis for an average annual increase of 8.95%. 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. Boston Properties's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BXP for this fiscal year. The Zacks Consensus Estimate for 2019 is $6.99 per share, which represents a year-over-year growth rate of 10.95%.

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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BXP 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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