Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.
Horace Mann in Focus
Headquartered in Springfield, Horace Mann (HMN) is a Finance stock that has seen a price change of -13.83% so far this year. The provider of auto and homeowners' insurance for teachers and other educators is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 3.19% compared to the Insurance - Multi line industry's yield of 2.62% and the S&P 500's yield of 1.86%.
In terms of dividend growth, the company's current annualized dividend of $1.20 is up 4.3% from last year. Over the last 5 years, Horace Mann has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.38%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Horace Mann's current payout ratio is 51%. This means it paid out 51% of its trailing 12-month EPS as dividend.
HMN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $2.75 per share, with earnings expected to increase 25% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HMN 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).
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
Horace Mann Educators Corporation (HMN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research