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Atmos Energy (ATO) Could Be a Great Choice
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Atmos Energy in Focus
Based in Dallas, Atmos Energy (ATO - Free Report) is in the Utilities sector, and so far this year, shares have seen a price change of 0.59%. The natural gas utility is paying out a dividend of $0.74 per share at the moment, with a dividend yield of 2.63% compared to the Utility - Gas Distribution industry's yield of 2.99% and the S&P 500's yield of 1.6%.
In terms of dividend growth, the company's current annualized dividend of $2.96 is up 8.8% from last year. Over the last 5 years, Atmos Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.95%. 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. Atmos's current payout ratio is 52%. This means it paid out 52% of its trailing 12-month EPS as dividend.
ATO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $6 per share, with earnings expected to increase 7.14% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, ATO 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).