Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Allianz in Focus
Allianz (AZSEY - Free Report) is headquartered in Munich, and is in the Finance sector. The stock has seen a price change of 15% since the start of the year. The insurance company is currently shelling out a dividend of $0.74 per share, with a dividend yield of 3.21%. This compares to the Insurance - Multi line industry's yield of 2.44% and the S&P 500's yield of 1.96%.
Taking a look at the company's dividend growth, its current annualized dividend of $0.74 is up 5.1% from last year. In the past five-year period, Allianz has increased its dividend 4 times on a year-over-year basis for an average annual increase of 13.13%. 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. Allianz's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AZSEY for this fiscal year. The Zacks Consensus Estimate for 2019 is $2.24 per share, representing a year-over-year earnings growth rate of 9.80%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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, AZSEY 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).