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Why Huntsman (HUN) is a Great Dividend Stock Right Now

Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Huntsman (HUN) have what it ta...

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This story originally appeared on Zacks

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

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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.

Huntsman in Focus

Based in The Woodlands, Huntsman (HUN) is in the Basic Materials sector, and so far this year, shares have seen a price change of 7.44%. The chemical company is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 2.78% compared to the Chemical - Diversified industry's yield of 1.5% and the S&P 500's yield of 1.4%.

Looking at dividend growth, the company's current annualized dividend of $0.75 is up 15.4% from last year. Huntsman has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 7.73%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Huntsman's current payout ratio is 32%. This means it paid out 32% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for HUN for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.14 per share, with earnings expected to increase 220.41% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, HUN 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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