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 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 International Group (AIG) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 11.25% since the start of the year. The insurer is currently shelling out a dividend of $0.45 per share, with a dividend yield of 2.22%. This compares to the Insurance - Multi line industry's yield of 1.93% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $1.80 is up 15.4% from last year. Over the last 5 years, American International Group has increased its dividend 3 times on a year-over-year basis for an average annual increase of 6.78%. 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 International Group's current payout ratio is 33%, meaning it paid out 33% 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 $6.15 per share, representing a year-over-year earnings growth rate of 24.24%.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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).
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American International Group, Inc. (AIG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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