There is a lot to be liked about Hubbell Incorporated (NYSE:HUBB) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 3.1% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Hubbell in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Hubbell fare?
The company currently pays out 58% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 41%, leading to a dividend yield of 3.1%. However, EPS should increase to $7.21, 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 company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. HUBB has increased its DPS from $1.4 to $3.36 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Hubbell produces a yield of 3.1%, which is high for Electrical stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank Hubbell as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. I’ve put together three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for HUBB’s future growth? Take a look at our free research report of analyst consensus for HUBB’s outlook.
- Valuation: What is HUBB 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 HUBB is currently mispriced by the market.
- Other 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 email@example.com.