Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Horace Mann in Focus
Based in Springfield, Horace Mann (HMN - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -27.07%. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 3.77%. In comparison, the Insurance - Multi line industry's yield is 3.7%, while the S&P 500's yield is 2.31%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 4.3% from last year. Horace Mann has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 3.47%. 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. Horace Mann's current payout ratio is 53%. This means it paid out 53% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HMN expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $2.70 per share, which represents a year-over-year growth rate of 22.73%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. With that in mind, HMN 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).