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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Ameren in Focus
Headquartered in St Louis, Ameren (AEE - Free Report) is a Utilities stock that has seen a price change of 10.29% so far this year. The utility is currently shelling out a dividend of $0.46 per share, with a dividend yield of 2.81%. This compares to the Utility - Electric Power industry's yield of 3.21% 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. Ameren has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 3.23%. 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. Right now, Ameren's payout ratio is 60%, which 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 $3.25 per share, which represents a year-over-year growth rate of 14.84%.
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. 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 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 Great Dividend Stock
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Ameren in Focus
Headquartered in St Louis, Ameren (AEE - Free Report) is a Utilities stock that has seen a price change of 10.29% so far this year. The utility is currently shelling out a dividend of $0.46 per share, with a dividend yield of 2.81%. This compares to the Utility - Electric Power industry's yield of 3.21% 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. Ameren has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 3.23%. 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. Right now, Ameren's payout ratio is 60%, which 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 $3.25 per share, which represents a year-over-year growth rate of 14.84%.
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. 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 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).