All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 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 1.04% so far this year. Currently paying a dividend of $0.87 per share, the company has a dividend yield of 2.47%. In comparison, the Utility - Gas Distribution industry's yield is 3.32%, while the S&P 500's yield is 1.54%.

Looking at dividend growth, the company's current annualized dividend of $3.48 is up 8.1% 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 8.81%. 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 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for ATO for this fiscal year. The Zacks Consensus Estimate for 2025 is $7.18 per share, representing a year-over-year earnings growth rate of 5.12%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 must be conscious 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).

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