Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 (AIG) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 5.77% since the start of the year. Currently paying a dividend of $0.45 per share, the company has a dividend yield of 2.34%. In comparison, the Insurance - Multi line industry's yield is 1.72%, while the S&P 500's yield is 1.49%.
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.
Earnings growth looks solid for AIG for this fiscal year. The Zacks Consensus Estimate for 2025 is $6.15 per share, which represents a year-over-year 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. 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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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, 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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