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Why American Water Works (AWK) is a Top Dividend Stock for Your Portfolio
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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 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.
American Water Works in Focus
Headquartered in Camden, American Water Works (AWK - Free Report) is a Utilities stock that has seen a price change of -22.56% so far this year. The water utility is currently shelling out a dividend of $0.71 per share, with a dividend yield of 2.4%. This compares to the Utility - Water Supply industry's yield of 2.26% and the S&P 500's yield of 1.71%.
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 9.54%. 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. American Water Works's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AWK expects solid earnings growth. 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
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.
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. 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, AWK 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).
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Why American Water Works (AWK) 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. 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 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.
American Water Works in Focus
Headquartered in Camden, American Water Works (AWK - Free Report) is a Utilities stock that has seen a price change of -22.56% so far this year. The water utility is currently shelling out a dividend of $0.71 per share, with a dividend yield of 2.4%. This compares to the Utility - Water Supply industry's yield of 2.26% and the S&P 500's yield of 1.71%.
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 9.54%. 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. American Water Works's current payout ratio is 59%. This means it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AWK expects solid earnings growth. 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
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.
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. 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, AWK 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).