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This is Why Lincoln National (LNC) is a Great Dividend Stock

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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.

Lincoln National in Focus

Lincoln National (LNC - Free Report) is headquartered in Radnor, and is in the Finance sector. The stock has seen a price change of 34.17% since the start of the year. The insurance and retirement business is currently shelling out a dividend of $0.42 per share, with a dividend yield of 2.49%. This compares to the Insurance - Life Insurance industry's yield of 0.56% and the S&P 500's yield of 1.36%.

Looking at dividend growth, the company's current annualized dividend of $1.68 is up 5% from last year. Over the last 5 years, Lincoln National has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.42%. 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. Right now, Lincoln National's payout ratio is 28%, which means it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for LNC for this fiscal year. The Zacks Consensus Estimate for 2021 is $10.32 per share, which represents a year-over-year growth rate of 131.91%.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 LNC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).


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