Yahoo Finance Are You Looking for a High-Growth Dividend Stock?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
American Water Works in Focus
American Water Works (AWK) is headquartered in Camden, and is in the Utilities sector. The stock has seen a price change of -2.57% since the start of the year. The water utility is currently shelling out a dividend of $0.76 per share, with a dividend yield of 2.38%. This compares to the Utility - Water Supply industry's yield of 2.23% and the S&P 500's yield of 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.06 is up 10.2% from last year. Over the last 5 years, American Water Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.72%. 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. American Water Works's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AWK for this fiscal year. The Zacks Consensus Estimate for 2024 is $5.24 per share, representing a year-over-year earnings growth rate of 6.94%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AWK 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 Water Works Company, Inc. (AWK) : Free Stock Analysis Report
