It looks like Horace Mann Educators Corporation (NYSE:HMN) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 13th of September, you won't be eligible to receive this dividend, when it is paid on the 30th of September.
Horace Mann Educators's upcoming dividend is US$0.29 a share, following on from the last 12 months, when the company distributed a total of US$1.15 per share to shareholders. Calculating the last year's worth of payments shows that Horace Mann Educators has a trailing yield of 2.5% on the current share price of $45.17. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Horace Mann Educators has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Horace Mann Educators's payout ratio is modest, at just 40% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Horace Mann Educators's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Horace Mann Educators has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
From a dividend perspective, should investors buy or avoid Horace Mann Educators? Earnings per share have been flat in recent years, although Horace Mann Educators reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Horace Mann Educators appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of Horace Mann Educators? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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