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.
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 International Group in Focus
Based in New York, American International Group (AIG) is in the Finance sector, and so far this year, shares have seen a price change of 4.3%. The insurer is currently shelling out a dividend of $0.4 per share, with a dividend yield of 2.11%. This compares to the Insurance - Multi line industry's yield of 1.65% and the S&P 500's yield of 1.52%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 2.6% from last year. American International Group has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 4.96%. 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 International Group's current payout ratio is 27%. This means it paid out 27% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AIG expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $6.45 per share, representing a year-over-year earnings growth rate of 30.30%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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, AIG 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).
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>American International Group, Inc. (AIG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
