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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.
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
Headquartered in Shelton, Hubbell (HUBB) is an Industrial Products stock that has seen a price change of 14.15% so far this year. The electrical products manufacturer is paying out a dividend of $0.98 per share at the moment, with a dividend yield of 2.19% compared to the Manufacturing - Electrical Utilities industry's yield of 3.02% and the S&P 500's yield of 1.42%.
Taking a look at the company's dividend growth, its current annualized dividend of $3.92 is up 5.7% from last year. Over the last 5 years, Hubbell has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.42%. 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. 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 $8.62 per share, representing a year-over-year earnings growth rate of 13.72%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. 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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