All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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

Atmos Energy (ATO) is headquartered in Dallas, and is in the Utilities sector. The stock has seen a price change of 7.52% since the start of the year. The natural gas utility is paying out a dividend of $0.87 per share at the moment, with a dividend yield of 2.32% compared to the Utility - Gas Distribution industry's yield of 3.42% and the S&P 500's yield of 1.57%.

Looking at dividend growth, the company's current annualized dividend of $3.48 is up 8.1% from last year. Atmos Energy has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 8.81%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Atmos's current payout ratio is 50%, meaning it paid out 50% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, ATO expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $7.18 per share, with earnings expected to increase 5.12% 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. 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. That said, they can take comfort from the fact that ATO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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

Atmos Energy Corporation (ATO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research