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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. 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 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 8.03% since the start of the year. Currently paying a dividend of $0.55 per share, the company has a dividend yield of 2.61%. In comparison, the Utility - Electric Power industry's yield is 3.31%, while the S&P 500's yield is 1.34%.
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 4.91%. 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 $3.78 per share, with earnings expected to increase 8% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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