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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. 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 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 18.1%. Currently paying a dividend of $0.98 per share, the company has a dividend yield of 2.12%. In comparison, the Manufacturing - Electrical Utilities industry's yield is 2.11%, while the S&P 500's yield is 1.34%.
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 9.41%. 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 51%. This means it paid out 51% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HUBB expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $8.46 per share, representing a year-over-year earnings growth rate of 11.61%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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