Unum (UNM) is a Top Dividend Stock Right Now: Should You Buy?

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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Unum in Focus

Unum (UNM) is headquartered in Chattanooga, and is in the Finance sector. The stock has seen a price change of -46.81% since the start of the year. The insurance company is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 7.35% compared to the Insurance - Accident and Health industry's yield of 1.13% and the S&P 500's yield of 2.31%.

Looking at dividend growth, the company's current annualized dividend of $1.14 is up 4.6% from last year. Unum has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.19%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Unum's payout ratio is 21%, which means it paid out 21% of its trailing 12-month EPS as dividend.

UNM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $5.77 per share, representing a year-over-year earnings growth rate of 6.26%.

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. It's important to keep in mind that not all companies provide 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, UNM 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).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Unum Group (UNM) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.