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Why Assured Guaranty (AGO) is a Great Dividend Stock Right Now
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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Assured Guaranty in Focus
Assured Guaranty (AGO - Free Report) is headquartered in Hamilton Bermuda, and is in the Finance sector. The stock has seen a price change of -14.05% since the start of the year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.09%. In comparison, the Insurance - Multi line industry's yield is 1.97%, while the S&P 500's yield is 1.76%.
Looking at dividend growth, the company's current annualized dividend of $1.12 is up 12% from last year. Assured Guaranty has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.10%. 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. Assured Guaranty's current payout ratio is 24%. This means it paid out 24% of its trailing 12-month EPS as dividend.
AGO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.60 per share, representing a year-over-year earnings growth rate of 11.11%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AGO 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).