Why American Assets Trust (AAT) is a Great Dividend Stock Right Now
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 -33.49%. Currently paying a dividend of $0.32 per share, the company has a dividend yield of 5.13%. In comparison, the REIT and Equity Trust - Retail industry's yield is 5%, while the S&P 500's yield is 1.84%.
Looking at dividend growth, the company's 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 2.83%. 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. American Assets Trust's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AAT for this fiscal year. The Zacks Consensus Estimate for 2022 is $2.26 per share, which represents a year-over-year growth rate of 13%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious 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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