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American Water Works (AWK) Could Be a Great Choice
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
American Water Works in Focus
American Water Works (AWK - Free Report) is headquartered in Camden, and is in the Utilities sector. The stock has seen a price change of -18.92% since the start of the year. Currently paying a dividend of $0.71 per share, the company has a dividend yield of 2.29%. In comparison, the Utility - Water Supply industry's yield is 2.15%, while the S&P 500's yield is 1.7%.
In terms of dividend growth, the company's current annualized dividend of $2.83 is up 10.2% from last year. In the past five-year period, American Water Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.52%. 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. Right now, American Water Works's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.
AWK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.80 per share, with earnings expected to increase 6.43% from the year ago period.
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. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that AWK is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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American Water Works (AWK) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
American Water Works in Focus
American Water Works (AWK - Free Report) is headquartered in Camden, and is in the Utilities sector. The stock has seen a price change of -18.92% since the start of the year. Currently paying a dividend of $0.71 per share, the company has a dividend yield of 2.29%. In comparison, the Utility - Water Supply industry's yield is 2.15%, while the S&P 500's yield is 1.7%.
In terms of dividend growth, the company's current annualized dividend of $2.83 is up 10.2% from last year. In the past five-year period, American Water Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.52%. 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. Right now, American Water Works's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.
AWK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $4.80 per share, with earnings expected to increase 6.43% from the year ago period.
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. It's important to keep in mind that not all companies provide 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. That said, they can take comfort from the fact that AWK is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).