American International Group (AIG) is a Top Dividend Stock Right Now: Should You Buy?

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

Headquartered in New York, American International Group (AIG) is a Finance stock that has seen a price change of -12.3% so far this year. Currently paying a dividend of $0.50 per share, the company has a dividend yield of 2.67%. In comparison, the Insurance - Multi line industry's yield is 1.95%, while the S&P 500's yield is 1.42%.

Looking at dividend growth, the company's current annualized dividend of $2.00 is up 14.3% from last year. Over the last 5 years, American International Group has increased its dividend 3 times on a year-over-year basis for an average annual increase of 6.78%. 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 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for AIG for this fiscal year. The Zacks Consensus Estimate for 2026 is $8.02 per share, representing a year-over-year earnings growth rate of 13.12%.

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 its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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This article originally published on Zacks Investment Research (zacks.com).

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