Income Investing, Made Simple
Most investors want their money to grow—through stocks, bonds, or other securities. Income investors want one more thing: steady, reliable cash they can count on. That’s why they often focus on stocks that pay dividends. A dividend is a slice of a company’s profits sent to shareholders. The most common way to size it up is by the dividend yield, which shows that payout as a percentage of today’s stock price. Over long stretches, research has shown that dividends can do a lot of heavy lifting for total returns—often more than a third of the outcome.
Why does that matter? Because cash paid out today can help smooth the ride, fund expenses, or be reinvested to compound over time. It’s simple in theory, but it only works when a company both earns enough and chooses to share those earnings, year after year.
Spotlight on Unum
Unum (NYSE: UNM), in the Finance sector, has gained 20.21% this year. The company pays a quarterly dividend of $0.42 per share, which works out to a dividend yield of 3.09%. That yield clears two relevant yardsticks: the 1.84% average in Insurance - Accident and Health and the S&P 500’s 1.58% average.
Dividend Growth You Can Track
Unum’s record shows a deliberate push to return capital to shareholders. Its annualized dividend is $1.68, up 20.9% from the prior year. Over the past five years, the company has raised its dividend four times, producing an average annual growth rate of 6.37%. The sustainability of future increases will depend on earnings growth and on how much of those earnings Unum pays out. Today, the payout ratio sits at 18%, meaning the company distributes 18% of its trailing twelve-month earnings per share as dividends. That leaves room—both to reinvest in the business and, potentially, to keep rewarding shareholders.
Looking Ahead: Earnings
Expectations for 2024 point in the right direction. The Consensus Estimate calls for earnings of $8.46 per share, a year-over-year increase of 10.44%. If results come in as projected, that would reinforce the foundation beneath the dividend and the company’s ability to keep investing for growth.
Weighing the Investment
Dividends matter for a few practical reasons. They can boost total return, help reduce overall portfolio swings, and—in some cases—come with tax advantages. But not every company can pay them regularly, and not every payout is built to last.
Seasoned, cash-generative businesses with stable earnings tend to make better dividend candidates. Fast-growing companies and many tech startups often reinvest instead of paying dividends. It’s also worth noting that high-yield stocks can face headwinds when interest rates rise. Against that backdrop, Unum stands out: it combines a competitive yield with demonstrated dividend growth and, in market assessments, has earned a strong Buy rating.
Frequently Asked Questions
Why might income investors consider Unum (NYSE: UNM)?
Unum offers a 3.09% dividend yield alongside a history of raising its payout. The company’s 18% payout ratio suggests it’s paying shareholders while still keeping most earnings to run and grow the business.
How has the stock performed so far this year?
Shares are up 20.21% this year, a strong showing within the Finance sector.
What’s the current dividend and yield?
Unum pays $0.42 per share, which annualizes to $1.68. Based on the current share price, that’s a 3.09% yield.
How fast is the dividend growing?
The annualized dividend rose 20.9% from last year. Over the past five years, Unum increased its dividend four times, with an average annual growth rate of 6.37%.
What are the earnings expectations for 2024?
The Consensus Estimate is $8.46 per share for 2024, implying 10.44% year-over-year growth. Future dividend decisions will hinge on how earnings and the 18% payout ratio evolve.
