Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Atmos Energy in Focus
Based in Dallas, Atmos Energy (ATO) is in the Utilities sector, and so far this year, shares have seen a price change of -15.36%. The natural gas utility is paying out a dividend of $0.57 per share at the moment, with a dividend yield of 2.43% compared to the Utility - Gas Distribution industry's yield of 2.81% and the S&P 500's yield of 2.51%.
Looking at dividend growth, the company's current annualized dividend of $2.30 is up 9.5% from last year. In the past five-year period, Atmos Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.86%. 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. Atmos's current payout ratio is 52%, meaning it paid out 52% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ATO for this fiscal year. The Zacks Consensus Estimate for 2020 is $4.70 per share, which represents a year-over-year growth rate of 8.05%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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, ATO presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Atmos Energy Corporation (ATO) : Free Stock Analysis Report
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