Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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
Based in San Diego, American Assets Trust (AAT) is in the Finance sector, and so far this year, shares have seen a price change of -20.86%. The real estate investment trust is currently shelling out a dividend of $0.32 per share, with a dividend yield of 4.31%. This compares to the REIT and Equity Trust - Retail industry's yield of 4.24% and the S&P 500's yield of 1.69%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.28 is up 10.3% from last year. In the past five-year period, American Assets Trust has increased its dividend 4 times on a year-over-year basis for an average annual increase of 2.38%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. American Assets Trust's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.
AAT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.20 per share, which represents a year-over-year growth rate of 10%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that AAT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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American Assets Trust, Inc. (AAT) : Free Stock Analysis Report
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