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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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Atmos Energy in Focus

Headquartered in Dallas, Atmos Energy (ATO) is a Utilities stock that has seen a price change of 0.23% so far this year. The natural gas utility is currently shelling out a dividend of $0.81 per share, with a dividend yield of 2.77%. This compares to the Utility - Gas Distribution industry's yield of 3.71% and the S&P 500's yield of 1.57%.

Taking a look at the company's dividend growth, its current annualized dividend of $3.22 is up 8.8% from last year. In the past five-year period, Atmos Energy has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.06%. 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. Right now, Atmos's payout ratio is 48%, which means it paid out 48% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ATO expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $6.72 per share, representing a year-over-year earnings growth rate of 10.16%.

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. 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. 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, ATO 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).

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Atmos Energy Corporation (ATO) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.