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Why Axis Capital (AXS) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.
Axis Capital in Focus
Headquartered in Pembroke, Axis Capital (AXS - Free Report) is a Finance stock that has seen a price change of 1.24% so far this year. The insurance company is paying out a dividend of $0.44 per share at the moment, with a dividend yield of 3.21% compared to the Insurance - Property and Casualty industry's yield of 0.8% and the S&P 500's yield of 1.74%.
In terms of dividend growth, the company's current annualized dividend of $1.76 is up 1.7% from last year. Over the last 5 years, Axis Capital has increased its dividend 4 times on a year-over-year basis for an average annual increase of 2.39%. 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. Axis Capital's current payout ratio is 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AXS for this fiscal year. The Zacks Consensus Estimate for 2023 is $7.50 per share, which represents a year-over-year growth rate of 29.09%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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 is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).