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...
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.
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.
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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