A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, The Hartford Financial Services Group Inc (NYSE:HIG) has been paying a dividend to shareholders. Today it yields 2.4%. Let’s dig deeper into whether Hartford Financial Services Group should have a place in your portfolio.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Hartford Financial Services Group pass our checks?
The current trailing twelve-month payout ratio for the stock is 78%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect HIG’s payout to fall to 25% of its earnings, which leads to a dividend yield of around 2.4%. However, EPS should increase to $5.19, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from Hartford Financial Services Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, Hartford Financial Services Group generates a yield of 2.4%, which is high for Insurance stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about Hartford Financial Services Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for HIG’s future growth? Take a look at our free research report of analyst consensus for HIG’s outlook.
- Valuation: What is HIG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HIG is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.