Ameren (AEE) is a Top Dividend Stock Right Now: Should You Buy?
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Ameren (AEE) 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 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 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.
Ameren in Focus
Based in St Louis, Ameren (AEE) is in the Utilities sector, and so far this year, shares have seen a price change of 6.56%. Currently paying a dividend of $0.55 per share, the company has a dividend yield of 2.64%. In comparison, the Utility - Electric Power industry's yield is 3.39%, while the S&P 500's yield is 1.38%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.20 is up 10% from last year. In the past five-year period, Ameren has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.91%. 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. Ameren's current payout ratio is 60%, meaning it paid out 60% of its trailing 12-month EPS as dividend.
AEE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $3.77 per share, with earnings expected to increase 7.71% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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. 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, AEE 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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Ameren Corporation (AEE): Free Stock Analysis Report
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