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This is Why Axis Capital (AXS) is a Great Dividend Stock

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Axis Capital in Focus

Headquartered in Pembroke, Axis Capital (AXS - Free Report) is a Finance stock that has seen a price change of 3.52% so far this year. The insurance company is currently shelling out a dividend of $0.43 per share, with a dividend yield of 3.05%. This compares to the Insurance - Property and Casualty industry's yield of 0.96% and the S&P 500's yield of 1.47%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.72 is up 2.4% from last year. In the past five-year period, Axis Capital has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.44%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Axis Capital's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, AXS expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $5.35 per share, which represents a year-over-year growth rate of 4.49%.

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.

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, AXS 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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