American Water Works (AWK) Could Be a Great Choice

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 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 Camden, American Water Works (AWK) is a Utilities stock that has seen a price change of -2.18% so far this year. The water utility is paying out a dividend of $0.83 per share at the moment, with a dividend yield of 2.8% compared to the Utility - Water Supply industry's yield of 2.72% and the S&P 500's yield of 1.42%.Looking at dividend growth, the company's current annualized dividend of $3.58 is up 10.2% from last year. Over the last 5 years, American Water Works has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.54%. 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 Water Works's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.AWK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $6.09 per share, representing a year-over-year earnings growth rate of 7.98%.Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, AWK 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).Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks