All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
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 16.85%. The real estate investment trust is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.39% compared to the REIT and Equity Trust - Retail industry's yield of 5.26% and the S&P 500's yield of 1.86%.
In terms of dividend growth, the company's current annualized dividend of $1.12 is up 2.8% from last year. In the past five-year period, American Assets Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.82%. 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, American Assets Trust's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AAT expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.23 per share, which represents a year-over-year growth rate of 6.70%.
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. 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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