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Why Hillenbrand (HI) is a Top Dividend Stock for Your Portfolio

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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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Hillenbrand in Focus

Headquartered in Batesville, Hillenbrand (HI - Free Report) is a Consumer Staples stock that has seen a price change of -21.04% so far this year. The diversified industrial company specializing in business-to-business products is paying out a dividend of $0.22 per share at the moment, with a dividend yield of 2.12% compared to the Funeral Services industry's yield of 1.74% and the S&P 500's yield of 1.56%.

Looking at dividend growth, the company's current annualized dividend of $0.87 is up 1.2% from last year. In the past five-year period, Hillenbrand has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.22%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Hillenbrand's current payout ratio is 23%. This means it paid out 23% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, HI expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.92 per share, which represents a year-over-year growth rate of 3.43%.

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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HI 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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