It looks like The Hartford Financial Services Group, Inc. (NYSE:HIG) is about to go ex-dividend in the next four days. Investors can purchase shares before the 31st of August in order to be eligible for this dividend, which will be paid on the 2nd of October.
Hartford Financial Services Group’s next dividend payment will be US$0.33 per share. Last year, in total, the company distributed US$1.30 to shareholders. Calculating the last year’s worth of payments shows that Hartford Financial Services Group has a trailing yield of 3.1% on the current share price of $41.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hartford Financial Services Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hartford Financial Services Group paid out a comfortable 25% of its profit last year.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Hartford Financial Services Group’s earnings per share have been growing at 10% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Hartford Financial Services Group has delivered 21% dividend growth per year on average over the past 10 years. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Hartford Financial Services Group worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Hartford Financial Services Group more closely.
Ever wonder what the future holds for Hartford Financial Services Group? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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