Are You Looking for a High-Growth Dividend Stock? AES (AES) Could Be a Great Choice
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does AES (AES) have what it takes? Let's find...
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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
AES in Focus
AES (AES) is headquartered in Arlington, and is in the Utilities sector. The stock has seen a price change of 1.91% since the start of the year. The power company is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.51%. This compares to the Utility - Electric Power industry's yield of 3.39% and the S&P 500's yield of 1.42%.
In terms of dividend growth, the company's current annualized dividend of $0.60 is up 4.7% from last year. In the past five-year period, AES has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.01%. 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. AES's current payout ratio is 40%. This means it paid out 40% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AES for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.54 per share, representing a year-over-year earnings growth rate of 6.94%.
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 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, AES 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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