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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Hillenbrand in Focus
Headquartered in Batesville, Hillenbrand (HI) is a Consumer Staples stock that has seen a price change of -20.93% so far this year. Currently paying a dividend of $0.22 per share, the company has a dividend yield of 2.12%. In comparison, the Funeral Services industry's yield is 1.76%, while the S&P 500's yield is 1.74%.
In terms of dividend growth, the company's current annualized dividend of $0.87 is up 1.2% from last year. Hillenbrand has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 1.22%. 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. Hillenbrand's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HI expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $3.90 per share, which represents a year-over-year growth rate of 2.90%.
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.
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, HI 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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Hillenbrand Inc (HI) : Free Stock Analysis Report
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