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Why Huntington Ingalls (HII) is a Great Dividend Stock Right Now

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

Huntington Ingalls in Focus

Headquartered in Newport News, Huntington Ingalls (HII - Free Report) is an Aerospace stock that has seen a price change of 26.28% so far this year. The shipbuilder is currently shelling out a dividend of $1.14 per share, with a dividend yield of 2.12%. This compares to the Aerospace - Defense industry's yield of 0.06% and the S&P 500's yield of 1.3%.

Looking at dividend growth, the company's current annualized dividend of $4.56 is up 7.8% from last year. In the past five-year period, Huntington Ingalls has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.22%. 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. Huntington Ingalls's current payout ratio is 31%. This means it paid out 31% of its trailing 12-month EPS as dividend.

HII is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $12.49 per share, with earnings expected to increase 24.90% from the year ago period.

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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, HII 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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