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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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Ameren (AEE) is headquartered in St Louis, and is in the Utilities sector. The stock has seen a price change of 12.76% since the start of the year. The utility is currently shelling out a dividend of $0.55 per share, with a dividend yield of 2.5%. This compares to the Utility - Electric Power industry's yield of 3.15% and the S&P 500's yield of 1.35%.
Looking at dividend growth, the company's current annualized dividend of $2.20 is up 10% from last year. Over the last 5 years, Ameren has increased its dividend 5 times on a year-over-year basis 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. Right now, Ameren's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.
AEE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $3.77 per share, which represents a year-over-year growth rate of 7.71%.
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. 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).
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Ameren Corporation (AEE) : Free Stock Analysis Report
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