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Axis Capital (AXS) Could Be a Great Choice

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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

Axis Capital (AXS - Free Report) is headquartered in Pembroke, and is in the Finance sector. The stock has seen a price change of 1.17% since the start of the year. Currently paying a dividend of $0.43 per share, the company has a dividend yield of 3.12%. In comparison, the Insurance - Property and Casualty industry's yield is 1.18%, while the S&P 500's yield is 1.73%.

Looking at dividend growth, the company's current annualized dividend of $1.72 is up 2.4% from last year. Over the last 5 years, Axis Capital has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.44%. 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. Axis Capital's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for AXS for this fiscal year. The Zacks Consensus Estimate for 2022 is $6.33 per share, representing a year-over-year earnings growth rate of 23.63%.

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. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that AXS is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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