This is Why Hillenbrand (HI) is a Great Dividend Stock

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Hillenbrand in Focus

Hillenbrand (HI) is headquartered in Batesville, and is in the Consumer Staples sector. The stock has seen a price change of 2.37% since the start of the year. The diversified industrial company specializing in business-to-business products is currently shelling out a dividend of $0.21 per share, with a dividend yield of 2.16%. This compares to the Funeral Services industry's yield of 1.68% and the S&P 500's yield of 1.97%.

In terms of dividend growth, the company's current annualized dividend of $0.84 is up 1.2% from last year. Over the last 5 years, Hillenbrand has increased its dividend 5 times on a year-over-year basis for an average annual increase of 1.26%. 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. Hillenbrand's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, HI expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $2.50 per share, with earnings expected to increase 2.88% 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, HI 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 views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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