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 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.
American Water Works in Focus
Headquartered in Camden, American Water Works (AWK - Free Report) is a Utilities stock that has seen a price change of -9.33% so far this year. The water utility is paying out a dividend of $0.71 per share at the moment, with a dividend yield of 2.36% compared to the Utility - Water Supply industry's yield of 2.39% and the S&P 500's yield of 1.57%.
Looking at dividend growth, the company's current annualized dividend of $2.83 is up 1.9% from last year. Over the last 5 years, American Water Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.28%. 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. American Water Works's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
AWK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $5.20 per share, which represents a year-over-year growth rate of 6.12%.
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. It's important to keep in mind that not all companies provide 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, AWK 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).
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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 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.
American Water Works in Focus
Headquartered in Camden, American Water Works (AWK - Free Report) is a Utilities stock that has seen a price change of -9.33% so far this year. The water utility is paying out a dividend of $0.71 per share at the moment, with a dividend yield of 2.36% compared to the Utility - Water Supply industry's yield of 2.39% and the S&P 500's yield of 1.57%.
Looking at dividend growth, the company's current annualized dividend of $2.83 is up 1.9% from last year. Over the last 5 years, American Water Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.28%. 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. American Water Works's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
AWK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $5.20 per share, which represents a year-over-year growth rate of 6.12%.
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. It's important to keep in mind that not all companies provide 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, AWK 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).
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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