Ameren (AEE) Could Be a Great Choice
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Ameren in Focus
Headquartered in St Louis, Ameren (AEE) is a Utilities stock that has seen a price change of -0.03% so far this year. The utility is paying out a dividend of $0.63 per share at the moment, with a dividend yield of 3.71% compared to the Utility - Electric Power industry's yield of 3.7% and the S&P 500's yield of 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.68 is up 6.3% from last year. In the past five-year period, Ameren has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.15%. 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. Ameren's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
AEE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $4.61 per share, with earnings expected to increase 5.25% 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. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AEE 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ameren Corporation (AEE) : Free Stock Analysis Report
