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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Ameren in Focus
Based in St Louis, Ameren (AEE - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 9.26%. The utility is currently shelling out a dividend of $0.46 per share, with a dividend yield of 2.84%. This compares to the Utility - Electric Power industry's yield of 3.29% and the S&P 500's yield of 1.81%.
Looking at dividend growth, the company's current annualized dividend of $1.83 is up 2.9% from last year. In the past five-year period, Ameren has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.23%. 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. Ameren's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AEE for this fiscal year. The Zacks Consensus Estimate for 2018 is $3.21 per share, representing a year-over-year earnings growth rate of 13.43%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AEE 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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Why Ameren (AEE) is a Top Dividend Stock
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Ameren in Focus
Based in St Louis, Ameren (AEE - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 9.26%. The utility is currently shelling out a dividend of $0.46 per share, with a dividend yield of 2.84%. This compares to the Utility - Electric Power industry's yield of 3.29% and the S&P 500's yield of 1.81%.
Looking at dividend growth, the company's current annualized dividend of $1.83 is up 2.9% from last year. In the past five-year period, Ameren has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.23%. 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. Ameren's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AEE for this fiscal year. The Zacks Consensus Estimate for 2018 is $3.21 per share, representing a year-over-year earnings growth rate of 13.43%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AEE 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).