Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Horace Mann (HMN - Free Report) is headquartered in Springfield, and is in the Finance sector. The stock has seen a price change of -18.92% since the start of the year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 3.39%. In comparison, the Insurance - Multi line industry's yield is 3.02%, while the S&P 500's yield is 2.12%.
In terms of dividend growth, the company's current annualized dividend of $1.20 is up 4.3% from last year. Over the last 5 years, Horace Mann has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.47%. 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. Horace Mann's current payout ratio is 53%, meaning 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, representing a year-over-year earnings growth rate of 22.73%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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).