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 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
American Assets Trust (AAT) is headquartered in San Diego, and is in the Finance sector. The stock has seen a price change of 18.12% since the start of the year. The real estate investment trust is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 2.36% compared to the REIT and Equity Trust - Retail industry's yield of 5.16% and the S&P 500's yield of 1.86%.
Looking at dividend growth, the company's current annualized dividend of $1.12 is up 2.8% from last year. Over the last 5 years, American Assets Trust has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.82%. 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. Right now, American Assets Trust's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.
AAT is expecting earnings to expand this fiscal year as well. 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. However, not all companies offer 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AAT 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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American Assets Trust, Inc. (AAT) : Free Stock Analysis Report
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