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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
American Assets Trust in Focus
Headquartered in San Diego, American Assets Trust (AAT - Free Report) is a Finance stock that has seen a price change of 15.14% so far this year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.42%. In comparison, the REIT and Equity Trust - Retail industry's yield is 5.13%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 2.8% from last year. American Assets Trust has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.08%. 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. Right now, American Assets Trust's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AAT expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.23 per share, representing a year-over-year earnings growth rate of 6.70%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, AAT 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).