Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor’s dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
– Zacks
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Hormel Foods in Focus
Hormel Foods (HRL) is headquartered in Austin, and is in the Consumer Staples sector. The stock has seen a price change of 0.55% since the start of the year. The maker of Spam canned ham, Dinty Moore stew and other foods is paying out a dividend of $0.26 per share at the moment, with a dividend yield of 2.12% compared to the Food – Meat Products industry’s yield of 0.47% and the S&P 500’s yield of 1.31%.
Looking at dividend growth, the company’s current annualized dividend of $1.04 is up 6.1% from last year. Hormel Foods has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 10.61%. 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. Hormel’s current payout ratio is 57%. This means it paid out 57% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, HRL expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $1.97 per share, representing a year-over-year earnings growth rate of 13.87%.
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.
Big, established firms that have more secure profits are often seen as the best dividend options, but it’s fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, HRL 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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Hormel Foods Corporation (HRL): Free Stock Analysis Report
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