In the world of investing, everyone enjoys seeing their portfolio soar. But for income investors, the focus shifts to consistent cash flow. Dividends, those coveted distributions of company earnings paid to shareholders, are a cornerstone of income investing strategies. Unum (UNM), a Chattanooga-based player in the Finance sector, is a shining example of a company that excels in delivering both consistent dividend payouts and growth potential.
Unum’s dividend yield currently stands at 2.68%, significantly outpacing the Insurance – Accident and Health industry average of 1.74% and the S&P 500’s yield of 1.5%. This translates to a $0.42 per share dividend, showcasing Unum’s commitment to rewarding its shareholders. But the story doesn’t end there. Unum has consistently increased its dividend, with a 20.9% bump in the annualized dividend to $1.68 from last year. Over the past five years, the company has increased its dividend four times, resulting in an impressive average annual increase of 7.59%.
Looking ahead, Unum’s future dividend growth is poised to be driven by continued earnings expansion. The Zacks Consensus Estimate for 2024 projects earnings to rise by 10.84% year-over-year, reaching $8.49 per share. This growth trajectory bodes well for the company’s ability to maintain and enhance its dividend payouts. It’s worth noting that Unum’s payout ratio, which represents the proportion of earnings paid out as dividends, sits at 18%. This signifies a healthy balance between dividend distribution and retaining earnings for future growth initiatives.
Investors often gravitate towards dividends for a variety of reasons. Dividends enhance investment profits, reduce portfolio risk, and offer tax advantages. However, it’s important to remember that not all companies offer dividends, and those that do often fall within the realm of established, profitable firms. High-growth companies and tech startups are less likely to prioritize dividends, opting instead to reinvest earnings for future growth.
One factor that income investors must consider is the potential impact of rising interest rates on high-yielding stocks. Unum, however, stands out as a compelling investment opportunity, particularly given its strong dividend profile and current Zacks Rank of 3 (Hold). This suggests a balanced approach, indicating that the stock is in a favorable position relative to its peers.