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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
The Hartford in Focus
Based in Hartford, The Hartford (HIG) is in the Finance sector, and so far this year, shares have seen a price change of 26.05%. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 2.14%. In comparison, the Insurance - Multi line industry's yield is 2.3%, while the S&P 500's yield is 1.92%.
In terms of dividend growth, the company's current annualized dividend of $1.20 is up 9.1% from last year. Over the last 5 years, The Hartford has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.93%. 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. The Hartford's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.
HIG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $5.11 per share, representing a year-over-year earnings growth rate of 18.01%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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 HIG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
The Hartford Financial Services Group, Inc. (NYSE:HIG
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