Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Tanger in Focus
Based in Greensboro, Tanger (SKT) is in the Finance sector, and so far this year, shares have seen a price change of -10.4%. The factory outlet mall operator is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 3.83% compared to the REIT and Equity Trust - Retail industry's yield of 4.43% and the S&P 500's yield of 1.55%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.17 is up 7.8% from last year. Tanger has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 7.18%. 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. Tanger's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
SKT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.26 per share, representing a year-over-year earnings growth rate of 6.10%.
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. 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, SKT 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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Tanger Inc. (SKT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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