Back to top

Image: Bigstock

Allstate (ALL) is a Top Dividend Stock Right Now: Should You Buy?

Read MoreHide Full Article

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Allstate in Focus

Based in Northbrook, Allstate (ALL - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -19.29%. The insurer is paying out a dividend of $0.54 per share at the moment, with a dividend yield of 2.38% compared to the Insurance - Property and Casualty industry's yield of 1.25% and the S&P 500's yield of 1.61%.

Looking at dividend growth, the company's current annualized dividend of $2.16 is up 8% from last year. In the past five-year period, Allstate has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.96%. 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. Allstate's current payout ratio is 18%, meaning it paid out 18% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for ALL for this fiscal year. The Zacks Consensus Estimate for 2020 is $10.76 per share, representing a year-over-year earnings growth rate of 3.16%.

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.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ALL 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).

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

The Allstate Corporation (ALL) - free report >>

Published in