Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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 States Water (AWR) is headquartered in San Dimas, and is in the Utilities sector. The stock has seen a price change of 8.13% since the start of the year. The water and electric utility is currently shelling out a dividend of $0.50 per share, with a dividend yield of 2.57%. This compares to the Utility - Water Supply industry's yield of 2.82% and the S&P 500's yield of 1.45%.
Looking at dividend growth, the company's current annualized dividend of $2.02 is up 4.2% from last year. Over the last 5 years, American States Water has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.23%. 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. American States Water's current payout ratio is 59%, meaning it paid out 59% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, AWR expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $3.71 per share, representing a year-over-year earnings growth rate of 10.09%.
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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that AWR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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American States Water Company (AWR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).