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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Hubbell in Focus
Based in Shelton, Hubbell (HUBB) is in the Industrial Products sector, and so far this year, shares have seen a price change of 17.04%. The electrical products manufacturer is currently shelling out a dividend of $0.98 per share, with a dividend yield of 2.14%. This compares to the Manufacturing - Electrical Utilities industry's yield of 3.05% and the S&P 500's yield of 1.39%.
Looking at dividend growth, the company's current annualized dividend of $3.92 is up 5.7% from last year. Hubbell has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.06%. 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. Right now, Hubbell's payout ratio is 48%, which means it paid out 48% of its trailing 12-month EPS as dividend.
HUBB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $8.70 per share, with earnings expected to increase 14.78% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HUBB 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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Hubbell Inc (HUBB): Free Stock Analysis Report
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