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 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.
Based in Worcester, Hanover Insurance Group (THG) is in the Finance sector, and so far this year, shares have seen a price change of 12.41%. The insurance company is currently shelling out a dividend of $0.90 per share, with a dividend yield of 2.07%. This compares to the Insurance - Property and Casualty industry's yield of 0.72% and the S&P 500's yield of 1.5%.
Looking at dividend growth, the company's current annualized dividend of $3.60 is up 4.3% from last year. Over the last 5 years, Hanover Insurance Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.68%. 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. Hanover Insurance's current payout ratio is 22%, meaning it paid out 22% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, THG expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $15.69 per share, representing a year-over-year earnings growth rate of 17.62%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide 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 have to be mindful 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 THG is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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The Hanover Insurance Group, Inc. (THG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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