Whether it’s through stocks, bonds, ETFs, or other types of securities, all investors love to see their portfolios generate big returns. However, when you are an income investor, your primary focus is to generate 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 focus on dividends. Dividends are the coveted distribution of a company’s earnings to shareholders, and investors often look at it based on its dividend yield, a metric that measures dividends as a percentage of the current stock price. Several academic studies show that dividends make up the bulk of long-term returns, and in many cases, dividends contribute more than 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 currently paying a dividend of $0.87 per share, with a dividend yield of 2.29%, compared to the utility’s – Gas Distribution industry yield of 2.83% and the S&P 500’s yield of 1.52%.
Looking at dividend growth, the company’s current annual 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 with an average annual increase of 8.75%. Looking ahead, future dividend growth will depend on earnings growth and the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as dividends. Atmos’s current payout ratio is 46%, which means it paid out 46% of its trailing-12-month EPS as dividends.
ATO’s earnings growth looks solid for this financial year. The Zacks Consensus Estimate for 2025 is $8.02 per share, representing a year-over-year growth rate of 7.51%.
Investors love dividends for many different reasons, from tax benefits and reducing overall portfolio risk to significantly improving stock investment profits. But, not every company offers quarterly payments.
Large, established firms with more secure profits are often seen as the best dividend choices, but it’s quite unusual to see high-growth businesses or tech start-ups offering dividends to their stockholders. Income investors need to be mindful of the fact that high yield stocks struggle during times of rising interest rates. With this in mind, ATO is an attractive investment opportunity. Not only is it a strong dividend play, but the stock currently sports a Zacks Rank of #3 (Hold).
<a href=