Assured Guaranty (AGO) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Assured Guaranty in Focus
Based in Hamilton Bermuda, Assured Guaranty (AGO) is in the Finance sector, and so far this year, shares have seen a price change of -13.48%. The insurance holding company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 2.08%. This compares to the Insurance - Multi line industry's yield of 2.13% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 12% from last year. Assured Guaranty has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 11.69%. 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. Right now, Assured Guaranty's payout ratio is 24%, which means it paid out 24% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AGO expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $4.60 per share, which represents a year-over-year growth rate of 11.11%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AGO 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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Assured Guaranty Ltd. (AGO) : Free Stock Analysis Report
