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Are You Looking for a High-Growth Dividend Stock? Unum (UNM) Could Be a Great Choice

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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.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Unum in Focus

Based in Chattanooga, Unum (UNM - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 0.24%. The insurance company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 3.87%. This compares to the Insurance - Accident and Health industry's yield of 1.11% and the S&P 500's yield of 1.88%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.14 is up 16.3% from last year. Over the last 5 years, Unum has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.46%. 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. Unum's current payout ratio is 19%. This means it paid out 19% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, UNM expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $5.45 per share, which represents a year-over-year growth rate of 4.81%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that UNM is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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