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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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.
American Tower in Focus
Headquartered in Boston, American Tower (AMT) is a Finance stock that has seen a price change of -11.04% so far this year. The wireless communications infrastructure company is paying out a dividend of $1.4 per share at the moment, with a dividend yield of 2.15% compared to the REIT and Equity Trust - Other industry's yield of 3.6% and the S&P 500's yield of 1.61%.
Looking at dividend growth, the company's current annualized dividend of $5.60 is up 7.5% from last year. American Tower has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 18.76%. 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. American Tower's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AMT expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $9.98 per share, with earnings expected to increase 3.42% from the year ago period.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AMT 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 Tower Corporation (AMT) : Free Stock Analysis Report
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