Why Unum (UNM) is a Top Dividend Stock for Your Portfolio

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.

Unum in Focus

Unum (UNM) is headquartered in Chattanooga, and is in the Finance sector. The stock has seen a price change of 14.18% since the start of the year. The insurance company is paying out a dividend of $0.37 per share at the moment, with a dividend yield of 2.83% compared to the Insurance - Accident and Health industry's yield of 2.44% and the S&P 500's yield of 1.54%.

In terms of dividend growth, the company's current annualized dividend of $1.46 is up 5% from last year. In the past five-year period, Unum has increased its dividend 4 times on a year-over-year basis for an average annual increase of 6.40%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Unum's payout ratio is 19%, which means it paid out 19% of its trailing 12-month EPS as dividend.

UNM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $8.19 per share, which represents a year-over-year growth rate of 6.92%.

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. 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. 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, UNM 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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