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.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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.
Hillenbrand in Focus
Headquartered in Batesville, Hillenbrand (HI) is a Consumer Staples stock that has seen a price change of -8.7% so far this year. The diversified industrial company specializing in business-to-business products is paying out a dividend of $0.21 per share at the moment, with a dividend yield of 2.43% compared to the Funeral Services industry's yield of 1.66% and the S&P 500's yield of 1.87%.
Looking at dividend growth, the company's current annualized dividend of $0.84 is up 1.2% from last year. Hillenbrand has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 1.24%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Hillenbrand's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HI expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.48 per share, representing a year-over-year earnings growth rate of 2.06%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HI is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Hillenbrand Inc (HI) : Free Stock Analysis Report
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