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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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Huntington Ingalls in Focus
Huntington Ingalls (HII) is headquartered in Newport News, and is in the Aerospace sector. The stock has seen a price change of 21.69% since the start of the year. The shipbuilder is currently shelling out a dividend of $1.14 per share, with a dividend yield of 2.2%. This compares to the Aerospace - Defense industry's yield of 0.07% and the S&P 500's yield of 1.27%.
Looking at dividend growth, the company's current annualized dividend of $4.56 is up 7.8% from last year. In the past five-year period, Huntington Ingalls has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.22%. 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. Huntington Ingalls's current payout ratio is 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HII for this fiscal year. The Zacks Consensus Estimate for 2021 is $12.11 per share, representing a year-over-year earnings growth rate of 21.10%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that HII is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
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