American Water Works (AWK) is a Top Dividend Stock Right Now: Should You Buy?

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 Water Works in FocusAmerican Water Works (AWK) is headquartered in Camden, and is in the Utilities sector. The stock has seen a price change of 13.34% since the start of the year. The water utility is paying out a dividend of $0.83 per share at the moment, with a dividend yield of 2.35% compared to the Utility - Water Supply industry's yield of 2.5% and the S&P 500's yield of 1.59%.Looking at dividend growth, the company's current annualized dividend of $3.31 is up 10.2% from last year. American Water Works has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.22%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. American Water Works's current payout ratio is 56%, meaning it paid out 56% of its trailing 12-month EPS as dividend.AWK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.71 per share, representing a year-over-year earnings growth rate of 5.94%.Bottom LineInvestors 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.For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, AWK presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Water Works Company, Inc. (AWK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks