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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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.
American International Group in Focus
Based in New York, American International Group (AIG) is in the Finance sector, and so far this year, shares have seen a price change of 8.45%. Currently paying a dividend of $0.4 per share, the company has a dividend yield of 2.03%. In comparison, the Insurance - Multi line industry's yield is 1.56%, while the S&P 500's yield is 1.73%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 2.6% from last year. In the past five-year period, American International Group has increased its dividend 2 times on a year-over-year basis for an average annual increase of 4.96%. 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. Right now, American International Group's payout ratio is 29%, which means it paid out 29% of its trailing 12-month EPS as dividend.
AIG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $6.08 per share, which represents a year-over-year growth rate of 22.83%.
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.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AIG 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).