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Why Hubbell (HUBB) is a Great Dividend Stock Right Now

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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 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.

Hubbell in Focus

Headquartered in Shelton, Hubbell (HUBB - Free Report) is an Industrial Products stock that has seen a price change of 15.26% so far this year. The electrical products manufacturer is currently shelling out a dividend of $0.98 per share, with a dividend yield of 2.17%. This compares to the Manufacturing - Electrical Utilities industry's yield of 1.44% and the S&P 500's yield of 1.39%.

Taking a look at the company's dividend growth, its current annualized dividend of $3.92 is up 5.7% from last year. In the past five-year period, Hubbell has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.47%. 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. Hubbell's current payout ratio is 52%. This means it paid out 52% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, HUBB expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $8.36 per share, which represents a year-over-year growth rate of 10.29%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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 must be conscious 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 HUBB 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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