Atmos Energy (ATO), could be a great choice
Investors love to see big returns on their portfolios. This could be through stocks, bonds or ETFs. For income investors, however, your main focus should be to generate consistent cash flow from all your liquid investments.
While cash flow may come from bond interest, interest from other types investments, income investors prefer dividends. Dividends are the most desirable distribution of company earnings to shareholders. Investors typically view this as its dividend yield which measures the dividend in percent of current stock prices. Many academic studies demonstrate that dividends are a significant portion of long-term return and, in some cases, more than one-third.
Atmos Energy in Focus
Atmos Energy (ATO), a Dallas-based utility company, has seen shares prices change by 9.28% so far this fiscal year. The natural gas utility is paying out a dividend of $0.74 per share at the moment, with a dividend yield of 2.59% compared to the Utility – Gas Distribution industry’s yield of 2.92% and the S&P 500’s yield of 1.67%.
Current annualized dividend of $2.96 represents 8.8% increase in dividend growth compared to last year. Atmos Energy’s dividend has grown 5 times over the past 5 years on an annual basis, for an average annual increase in dividend of 8.3%. Future dividend growth will depend on earnings growth and the payout ratio. This is the percentage of an organization’s annual earnings per shareholder it pays as a dividend. Atmos’s current payout ratio is 48%. That means it has paid 48% of its trailing twelve-month EPS in dividends.
ATO expects earnings to grow this fiscal year. Zacks Consensus Estimates for 2022 are $5.97 per share. This represents a year-over-2018 growth rate at 6.61%.
Bottom line
Dividends can be a great way to increase your stock investing profits, decrease portfolio risk and even provide tax advantages. Investors love dividends for many reasons. Keep in mind, not all companies offer a quarterly payout.
It’s rare for a tech startup or large growth company to offer a dividend. It is less common to see dividends from larger companies that have more established profits. Income investors should be aware of the fact high-yielding stocks can struggle during rising interest rates. ATO presents a compelling opportunity for investors. The stock is a strong dividend play with a Zacks Rating of 3 (Hold).
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Atmos Energy Corporation (ATO) : Free Stock Analysis Report