Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Hubbell in Focus
Hubbell (HUBB - Free Report) is headquartered in Shelton, and is in the Industrial Products sector. The stock has seen a price change of 0.39% since the start of the year. Currently paying a dividend of $0.91 per share, the company has a dividend yield of 2.45%. In comparison, the Manufacturing - Electrical Utilities industry's yield is 2.54%, while the S&P 500's yield is 1.75%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.64 is up 6.1% from last year. Hubbell has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.46%. 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. Right now, Hubbell's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HUBB expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $8.58 per share, with earnings expected to increase 5.67% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HUBB presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).