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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
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 9.71%. The provider of auto and homeowners' insurance for teachers and other educators is currently shelling out a dividend of $0.35 per share, with a dividend yield of 3.25%. This compares to the Insurance - Multi line industry's yield of 1.72% and the S&P 500's yield of 1.57%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.40 is up 2.9% from last year. In the past five-year period, Horace Mann has increased its dividend 5 times on a year-over-year basis for an average annual increase of 3.18%. Future dividend growth will depend on earnings growth as well as 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 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HMN expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $4.01 per share, representing a year-over-year earnings growth rate of 26.10%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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 HMN is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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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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