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American Assets Trust (AAT) is a Top Dividend Stock Right Now: Should You Buy?

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 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 Assets Trust in Focus

Based in San Diego, American Assets Trust (AAT) is in the Finance sector, and so far this year, shares have seen a price change of -27.07%. Currently paying a dividend of $0.32 per share, the company has a dividend yield of 4.68%. In comparison, the REIT and Equity Trust - Retail industry's yield is 4.24%, while the S&P 500's yield is 1.65%.

Looking at dividend growth, the company's current annualized dividend of $1.28 is up 10.3% from last year. American Assets Trust has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 2.38%. 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 Assets Trust's current payout ratio is 57%, meaning it paid out 57% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, AAT expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $2.24 per share, with earnings expected to increase 12% from the year ago period.

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. But, not every company offers 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, AAT 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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