Why Cincinnati Financial (CINF) is a Great Dividend Stock Right Now
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Cincinnati Financial in Focus
Cincinnati Financial (CINF) is headquartered in Fairfield, and is in the Finance sector. The stock has seen a price change of 34.92% since the start of the year. The insurer is currently shelling out a dividend of $0.63 per share, with a dividend yield of 2.14%. This compares to the Insurance - Property and Casualty industry's yield of 1.04% and the S&P 500's yield of 1.38%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.52 is up 5% from last year. In the past five-year period, Cincinnati Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.02%. 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. Cincinnati Financial's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CINF for this fiscal year. The Zacks Consensus Estimate for 2021 is $4.53 per share, with earnings expected to increase 38.11% from the year ago period.
Bottom Line
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CINF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
To read this article on Zacks.com click here.
