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Why American International Group (AIG) is a Top Dividend Stock for Your Portfolio

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

American International Group in Focus

Headquartered in New York, American International Group (AIG) is a Finance stock that has seen a price change of 8.37% so far this year. The insurer is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 2.18% compared to the Insurance - Multi line industry's yield of 2.05% and the S&P 500's yield of 1.59%.

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Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 14.3% from last year. Over the last 5 years, American International Group has increased its dividend 1 times on a year-over-year basis for an average annual increase of 2.29%. 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 21%, meaning it paid out 21% of its trailing 12-month EPS as dividend.

AIG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $7.02 per share, with earnings expected to increase 3.39% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. 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 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, 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

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