Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 -17.98%. Currently paying a dividend of $0.21 per share, the company has a dividend yield of 2.97%. In comparison, the Chemical - Diversified industry's yield is 1.95%, while the S&P 500's yield is 1.62%.
Looking at dividend growth, the company's current annualized dividend of $0.85 is up 17.2% from last year. In the past five-year period, Huntsman has increased its dividend 3 times on a year-over-year basis for an average annual increase of 7.71%. 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. Huntsman's current payout ratio is 21%, meaning it paid out 21% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HUN expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $4.45 per share, which represents a year-over-year growth rate of 25.71%.
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 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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