Why Atmos Energy (ATO) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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.
Headquartered in Dallas, Atmos Energy (ATO) is a Utilities stock that has seen a price change of 25.34% so far this year. The natural gas utility is paying out a dividend of $0.87 per share at the moment, with a dividend yield of 2.29% compared to the Utility - Gas Distribution industry's yield of 2.83% and the S&P 500's yield of 1.52%.
Looking at dividend growth, the company's current annualized dividend of $4.00 is up 14.9% from last year. Over the last 5 years, Atmos Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.75%. 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. Atmos's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ATO for this fiscal year. The Zacks Consensus Estimate for 2025 is $8.02 per share, which represents a year-over-year growth rate of 7.51%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, ATO 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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Atmos Energy Corporation (ATO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
