Why Huntsman (HUN) is a Great Dividend Stock Right Now

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Huntsman in Focus

Based in The Woodlands, Huntsman (HUN) is in the Basic Materials sector, and so far this year, shares have seen a price change of 0%. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 2.44%. In comparison, the Chemical - Diversified industry's yield is 1.84%, while the S&P 500's yield is 1.54%.

Looking at dividend growth, the company's current annualized dividend of $0.85 is up 17.2% from last year. Huntsman has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 7.78%. 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. Right now, Huntsman's payout ratio is 21%, which means it paid out 21% of its trailing 12-month EPS as dividend.

HUN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $4.34 per share, with earnings expected to increase 22.60% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, HUN presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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