For income investors, consistent cash flow is paramount. Dividends, representing a portion of a company’s earnings distributed to shareholders, are often a key focus. While many investors seek big returns from their portfolios, income investors prioritize steady cash flow from their liquid investments.
Unum (UNM), a leading player in the insurance sector, is currently offering a dividend yield of 3.09%, significantly higher than the Insurance – Accident and Health industry’s average of 1.84% and the S&P 500’s yield of 1.58%. This means Unum is paying out $0.42 per share, exceeding the average dividend payout in its industry and the broader market.
Unum’s commitment to dividend growth is evident in its current annualized dividend of $1.68, representing a 20.9% increase from last year. Over the past five years, the company has consistently increased its dividend four times, averaging an annual growth of 6.37%. This demonstrates Unum’s dedication to shareholder returns and its commitment to providing a steady stream of income for its investors.
Looking ahead, Unum’s future dividend growth will depend on its earnings performance and payout ratio, which measures the proportion of earnings distributed as dividends. Currently, Unum’s payout ratio stands at 18%, indicating that it distributes 18% of its trailing 12-month earnings per share as dividends. With analysts forecasting earnings growth for Unum in 2024, there is potential for further dividend increases.
For income investors, dividends provide several advantages, including improved investment profits, reduced portfolio risk, and tax benefits. While many established companies with strong profits offer dividends, high-growth businesses and tech start-ups often prioritize reinvesting earnings back into the company instead of distributing them as dividends. It’s important to note that high-yielding stocks can struggle during periods of rising interest rates, as investors may seek higher returns from fixed-income investments.
Unum’s combination of a robust dividend yield, a history of dividend growth, and a favorable outlook for future earnings growth makes it an attractive investment opportunity for income investors. With a strong Zacks Rank of #2 (Buy), Unum presents a compelling option for those seeking to generate consistent cash flow from their investment portfolio.
