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 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.
Horace Mann in Focus
Based in Springfield, Horace Mann (HMN) is in the Finance sector, and so far this year, shares have seen a price change of 1.84%. The provider of auto and homeowners' insurance for teachers and other educators is paying out a dividend of $0.35 per share at the moment, with a dividend yield of 3.5% compared to the Insurance - Multi line industry's yield of 1.86% and the S&P 500's yield of 1.69%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.40 is up 2.9% from last year. Horace Mann has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 3.18%. 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. Horace Mann's current payout ratio is 43%. This means it paid out 43% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for HMN for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.80 per share, with earnings expected to increase 19.50% 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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, HMN 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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Horace Mann Educators Corporation (HMN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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