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This is Why American Assets Trust (AAT) is a Great Dividend Stock

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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. 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 Assets Trust in Focus

Based in San Diego, American Assets Trust (AAT - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 16.43%. The real estate investment trust is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.39% compared to the REIT and Equity Trust - Retail industry's yield of 5.11% and the S&P 500's yield of 1.9%.

Looking at dividend growth, the company's current annualized dividend of $1.12 is up 2.8% from last year. In the past five-year period, American Assets Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.08%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. American Assets Trust's current payout ratio is 54%, meaning it paid out 54% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for AAT for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.21 per share, representing a year-over-year earnings growth rate of 5.74%.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AAT 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).


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