Why The Hartford (HIG) is a Top Dividend Stock for Your Portfolio
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.
The Hartford in Focus
The Hartford (HIG) is headquartered in Hartford, and is in the Finance sector. The stock has seen a price change of 35.24% since the start of the year. The insurance and financial services company is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 2.11% compared to the Insurance - Multi line industry's yield of 1.71% and the S&P 500's yield of 1.36%.
In terms of dividend growth, the company's current annualized dividend of $1.40 is up 7.7% from last year. Over the last 5 years, The Hartford has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.06%. 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. The Hartford's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.
HIG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $5.86 per share, representing a year-over-year earnings growth rate of 1.38%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that HIG is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
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