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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.
Ameren in Focus
Ameren (AEE) is headquartered in St Louis, and is in the Utilities sector. The stock has seen a price change of 3.77% since the start of the year. Currently paying a dividend of $0.55 per share, the company has a dividend yield of 2.72%. In comparison, the Utility - Electric Power industry's yield is 3.31%, while the S&P 500's yield is 1.45%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.20 is up 10% from last year. Ameren has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.75%. 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 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AEE expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $3.76 per share, which represents a year-over-year growth rate of 7.43%.
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. 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, 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).
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Ameren Corporation (AEE) : Free Stock Analysis Report
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