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 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 International Group (AIG) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of -13.3% since the start of the year. The insurer is currently shelling out a dividend of $0.50 per share, with a dividend yield of 2.7%. This compares to the Insurance - Multi line industry's yield of 1.77% and the S&P 500's yield of 1.42%.
Looking at dividend growth, the company's current annualized dividend of $2.00 is up 14.3% from last year. Over the last 5 years, American International Group has increased its dividend 3 times on a year-over-year basis for an average annual increase of 6.78%. 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 International Group's current payout ratio is 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for AIG for this fiscal year. The Zacks Consensus Estimate for 2026 is $8.02 per share, which represents a year-over-year growth rate of 13.12%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. 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).
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American International Group, Inc. (AIG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).