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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...

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This story originally appeared on Zacks

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.

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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%.

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. 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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