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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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
Hubbell (HUBB) is headquartered in Shelton, and is in the Industrial Products sector. The stock has seen a price change of 24.13% since the start of the year. The electrical products manufacturer is currently shelling out a dividend of $0.98 per share, with a dividend yield of 2.01%. This compares to the Manufacturing - Electrical Utilities industry's yield of 3.22% and the S&P 500's yield of 1.4%.
In terms of 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%. 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. Hubbell's current payout ratio is 48%, meaning 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, representing a year-over-year earnings growth rate of 14.78%.
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.
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 have to be mindful 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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