When looking for reliable dividend-paying stocks, investors often use screening methods that balance several fundamental factors. The "Best Dividend" screen finds companies with good dividend features while keeping sound financial health and profitability. This method helps steer clear of high-yield situations where unsustainable payments might point to deeper business issues. By setting minimum scores across these three areas, the screen finds companies that could possibly maintain and increase their dividends over time.
Hubbell Inc (NYSE:HUBB) appears as an interesting candidate from this screening method, especially for investors looking for dividend growth together with financial stability. The Connecticut-based electrical equipment manufacturer works through utility and electrical solutions segments, serving construction, industrial, and utility applications across North America.
Dividend Quality Assessment
Hubbell's dividend profile shows several features that dividend investors usually look for:
- Sustainable Payout Ratio: The company pays out 33.45% of its income as dividends, well under the caution level of 80% that might suggest payment sustainability worries
- Reliable History: With at least 10 years of steady dividend payments and no cuts during that time, Hubbell has built dividend reliability
- Growing Payments: The dividend has increased at an average yearly rate of 7.79% over recent years, giving investors income growth that beats inflation
- Industry Comparison: While the 1.25% yield may seem moderate, it actually is higher than the dividend payments of 90% of companies in the electrical equipment industry
The moderate payout ratio is especially important for dividend sustainability, as it shows the company keeps enough earnings to put back into business growth while rewarding shareholders.
Profitability Supporting Dividend Strength
Hubbell's strong profitability gives the base for its dividend reliability:
- Return Metrics: The company reaches notable returns with ROA of 11.59%, ROE of 23.76%, and ROIC of 15.81%, all ranking in the top group of industry peers
- Margin Strength: Operating margin of 20.35% puts Hubbell in the top 3% of the industry, while the 14.73% profit margin is better than 89% of competitors
- Trend Improvement: Both operating and profit margins have shown good growth paths in recent years
These profitability numbers are important for dividend investors because steady high returns and widening margins provide the earnings ability needed to fund future dividend raises without stressing the company's financial resources.
Financial Health Supporting Dividend Continuity
The company's balance sheet strength gives more confidence for dividend sustainability:
- Solvency Strength: An Altman-Z score of 6.27 shows very low bankruptcy risk, doing better than 86% of industry peers
- Manageable Debt: A debt-to-equity ratio of 0.42 shows a good balance between debt and equity financing
- Debt Service Capacity: With a debt-to-free-cash-flow ratio of 2.35 years, Hubbell could in theory pay back all debt in under two-and-a-half years from operating cash flows
Sound financial health lowers the chance that dividend payments would need to be reduced during economic downturns or times of industry pressure, giving income stability for investors.
Valuation Context
While not the main focus for dividend investors, valuation stays relevant:
- Earnings Multiple: Trading at 26.70 times earnings, Hubbell sits about in line with the S&P 500 average
- Industry Comparison: Despite this multiple, 80% of electrical equipment industry peers trade at higher P/E ratios
- Cash Flow Valuation: The price-to-free-cash-flow ratio seems appealing compared to industry standards
For dividend-focused investors, fair valuation helps make sure that future dividend growth isn't hurt by paying too much for the stock at the start.
Growth Prospects and Dividend Sustainability
The link between business growth and dividend growth shows important details:
- Historical Performance: Earnings per share have grown at a 15.29% yearly rate over recent years
- Future Expectations: Analysts predict continued EPS growth of 8.34% per year
- Dividend Alignment: The current 7.79% dividend growth rate matches fairly well with expected earnings growth, indicating sustainability
This match between earnings growth and dividend growth is key for long-term dividend investors, as it shows the company can keep raising payments without hurting its financial standing.
The full fundamental analysis of Hubbell Inc shows a company with the features dividend investors usually look for: a sustainable and growing payment supported by strong profitability, sound financial health, and fair growth prospects. Investors can look at the detailed fundamental report for deeper study of these numbers.
For investors looking for more dividend stock ideas screened using a similar method, the Best Dividend Stocks screen gives several candidates meeting these balanced standards of dividend quality, profitability, and financial health.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.
