Although ASX investors love to buy financial stocks if they are seeking dividend income, they most often start and stop with the ASX banks. Whilst banks are indeed lucrative sources of passive dividend income, many other financial stocks are popular too. Insurance Australia Group Ltd (ASX: IAG) shares are a great example.
IAG, the insurance company behind popular insurance brands like NRMA, has been listed on the ASX for decades. Over its ASX life, it has built up a solid reputation as a reliable income stock. Heck, even Warren Buffett invested in IAG a few years ago.
IAG shares have enjoyed a happy few months, currently up more than 20% since March. However, the company is also down by about 5% over the past year.
But let's dive into just how much IAG shares are offering investors who are searching for dividends today.
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IAG shares: How's that dividend yield looking?
At the time of writing, IAG shares are trading at $8.08 each, down 0.49% for the day thus far. At this price, the insurance stock is trading on a trailing dividend yield of 3.84%.
That comes from IAG's last two dividend payments. The first of those was the final dividend, worth 19 cents per share, that investors received last September. The second, the interim dividend from March, was worth 12 cents per share. Both payments came partially franked, at 40% and 25%, respectively.
That 12-month total of 31 cents per share gives IAG that 3.84% yield at current pricing.
However, this yield doesn't mean investors are guaranteed a 3.84% yield going forward. Like all trailing dividend yields, it only reflects what investors have already received in income, not what they might get going forward. We can't know for sure what kind of dividends IAG will pay out over the next 12 months until the company reveals them. Insurance stocks do tend to be a bit more unpredictable than the average ASX dividend share, too, given the unpredictable nature of their business models.
In some comfort to IAG investors, though, some ASX brokers are eyeing off IAG at the current price. As my Fool colleague covered late last month, brokers at investment bank Goldman Sachs have recently given IAG shares a buy rating, together with a 12-month share price target of $8.60. That would see some decent upside for investors if accurate. But we shall have to wait and see what IAG pulls out of its hat over the rest of the year.
