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 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
Headquartered in San Diego, American Assets Trust (AAT) is a Finance stock that has seen a price change of -8.89% so far this year. The real estate investment trust is currently shelling out a dividend of $0.3 per share, with a dividend yield of 2.87%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.9% and the S&P 500's yield of 2.02%.
In terms of dividend growth, the company's current annualized dividend of $1.20 is up 5.3% from last year. Over the last 5 years, American Assets Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.63%. 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. Right now, American Assets Trust's payout ratio is 55%, which means it paid out 55% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AAT for this fiscal year. The Zacks Consensus Estimate for 2020 is $2.41 per share, which represents a year-over-year growth rate of 9.55%.
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 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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American Assets Trust, Inc. (AAT) : Free Stock Analysis Report
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