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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Atmos Energy in Focus
Based in Dallas, Atmos Energy (ATO) is in the Utilities sector, and so far this year, shares have seen a price change of -9.49%. The natural gas utility is paying out a dividend of $0.57 per share at the moment, with a dividend yield of 2.27% compared to the Utility - Gas Distribution industry's yield of 3.43% and the S&P 500's yield of 1.89%.
Looking at dividend growth, the company's current annualized dividend of $2.30 is up 9.5% from last year. In the past five-year period, Atmos Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.08%. 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, Atmos's payout ratio is 50%, which means it paid out 50% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, ATO expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $4.70 per share, which represents a year-over-year growth rate of 8.05%.
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.
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 ATO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Atmos Energy Corporation (ATO) : Free Stock Analysis Report
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