Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
The Hartford in Focus
Headquartered in Hartford, The Hartford (HIG) is a Finance stock that has seen a price change of -5.91% so far this year. Currently paying a dividend of $0.38 per share, the company has a dividend yield of 2.37%. In comparison, the Insurance - Multi line industry's yield is 1.76%, while the S&P 500's yield is 1.74%.
Looking at dividend growth, the company's current annualized dividend of $1.54 is up 7.3% from last year. The Hartford has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.22%. 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. The Hartford's current payout ratio is 22%. This means it paid out 22% of its trailing 12-month EPS as dividend.
HIG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.21 per share, with earnings expected to increase 17.24% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, HIG 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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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
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