Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Hilltop Holdings in Focus

Hilltop Holdings (HTH) is headquartered in Dallas, and is in the Finance sector. The stock has seen a price change of 4.61% since the start of the year. The insurance holding compnay is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.4% compared to the Banks - Southeast industry's yield of 2.38% and the S&P 500's yield of 1.6%.

In terms of dividend growth, the company's current annualized dividend of $0.72 is up 5.9% from last year. Hilltop Holdings has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 15.18%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Hilltop Holdings's payout ratio is 37%, which means it paid out 37% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for HTH for this fiscal year. The Zacks Consensus Estimate for 2025 is $1.75 per share, with earnings expected to increase 0.57% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that HTH is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

Story Continues

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Hilltop Holdings Inc. (HTH):Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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