Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Hanover Insurance Group in Focus
Headquartered in Worcester, Hanover Insurance Group (THG) is a Finance stock that has seen a price change of 3.07% so far this year. The insurance company is paying out a dividend of $0.9 per share at the moment, with a dividend yield of 2.26% compared to the Insurance - Property and Casualty industry's yield of 0.67% and the S&P 500's yield of 1.64%.
In terms of 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 6.93%. 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 27%. This means it paid out 27% 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 $14.36 per share, which represents a year-over-year growth rate of 7.65%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, THG 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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The Hanover Insurance Group, Inc. (THG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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