Last update on 2024-06-27

Hartford Financial Services Group (HIG) - Dividend Analysis (Final Score: 5/8)

Evaluate Hartford Financial Services Group (HIG)'s dividend performance using an 8-criteria system. Final score: 5/8. Learn about its stability and growth.

Short Analysis - Dividend Score: 5

We're running Hartford Financial Services Group (HIG) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis uses eight criteria to assess the stability and performance of Hartford Financial Services Group's (HIG) dividend policy. HIG scores 5 out of 8. The criteria reveal that its dividend yield is significantly lower than the industry average, showing potential issues for income-focused investors. The dividend growth rate shows moderate but inconsistent growth due to large fluctuations, indicating financial instability. The average payout ratio over 20 years is negative, raising concerns about sustainability, despite recent improvements. Dividend coverage by earnings is erratic, but cash flow coverage is strong, signaling well-managed payouts. Historical dividends show recovery and stability post-2008 crisis, but the drastic drops before question resilience under market pressure. The company has paid dividends for over 25 years and has reliably repurchased stock for over 20 years, enhancing shareholder value.

Insights for Value Investors Seeking Stable Income

Given HIG's mixed performance with its dividend policy, potential investors should approach with caution. The erratic historical data and periods of significant financial instability present risks, especially for those relying on dividends for income. However, recent stabilized dividends and robust cash flow coverage indicate a possible turning point. Long-term investors might find value, but it's essential to consider historical volatility and future earnings stability. It's recommended to monitor HIG closely and perhaps seek additional, more stable investments alongside.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

The dividend yield indicates how much a company pays out in dividends relative to its share price. It is a crucial metric for income-focused investors, as it provides insight into the potential income from holding a stock.

Hartford Financial Services Group (HIG) has a current dividend yield of 2.1709%, which is significantly lower than the industry average of 3.85%. Historically, HIG's dividend yield has fluctuated, peaking at 11.6322% in 2008 and experiencing lows such as 0.755% in 2010. Over the past two decades, it has remained below the industry average for most years. Specifically, considering the stock price closed at $80.38, the relatively low dividend yield might suggest that the company is either reinvesting profits for growth or possibly not generating as much profit relative to its market price compared to its industry peers. Investors relying on dividends for income might find HIG less attractive given its historical performance, hence this trend can be interpreted as unfavorable for income-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate is a key metric for evaluating a company's ability to increase dividend payments over time, indicating financial health and shareholder value.

The dividend growth rate data for Hartford Financial Services Group (HIG) over the past 20 years shows substantial volatility. For instance, values vary extremely from negative percentages such as -89.5288% in 2009 to a high 100% in 2011. The Average Dividend Ratio stands at around 11.45%. While the overall average suggests moderate growth, the inconsistency and significant fluctuations indicate periods of financial instability or strategic adjustments. This trend points towards an unreliable growth pattern, making HIG's dividend less predictable. Therefore, despite meeting the >5% average criterion, the extreme volatility raises concerns about sustainability and reliability.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Average Payout Ratio represents the proportion of earnings paid to shareholders in dividends and should be lower than 65% to ensure sustainable growth.

The Average Payout Ratio for Hartford Financial Services Group (HIG) over the last 20 years stands at -18.85%. This trend can be highly concerning due to the extreme volatility and inconsistent figures observed in the payout ratios, including significant negative values which denote financial instability. These erratic payout ratios indicate periods where the company's earnings were insufficient to cover dividends or suffered major losses. Notably, the negative values in years such as 2003 (-326.25%), 2007 (-512.16%), and other spot negative ratios point towards alarming financial episodes. Meanwhile, positive payout ratios that peaked at values over 100% as seen in 2013 (139.39%) signal unsustainable dividend practices. In conclusion, despite recent positive figures, the highly erratic 20-year average suggests prudence for potential investors focusing on dividend stability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings when the Earnings per Share (EPS) is significantly higher than the Dividend per Share (DPS), indicating that a company generates more than enough earnings to cover its dividend payments. This is crucial for sustainable and consistent dividend payouts to shareholders.

Examining Hartford Financial Services Group (HIG) from 2003 to 2023, we note significant variability in the coverage of dividends by earnings. The ratio of Dividends per Share to Earnings per Share (DPS/EPS) demonstrates noticeable fluctuations: - **2003-2009**: The EPS were negative in 2003 and 2008, leading to negative coverage ratios (-3.26 and -0.21) in these years, which indicates unsustainable payouts. Other years maintain low but positive coverage, indicating sub-optimal but passable dividend coverage. - **2010-2015**: Generally positive trends are noticed, though with low coverage ratios around 0.057 to 0.38. This implies dividends are paid, but not robustly covered by earnings. - **2016-2022**: Includes inconsistent patches as seen in 2017 with a negative EPS, thus resulting in -0.11 coverage. However, for most part, the values range commendably with 0.21 to 0.38, signifying better dividend coverage. - **2023**: An EPS of 8.1537 covers DPS well, but with a ratio of 0.21, it suggests overall EPS fluctuations. On balance, HIG, despite erratic earnings and coverage ratios, indicates improving yet somewhat variable EPS coverage over dividends. This reflects potential risks and needs for earnings stabilization for consistent long-term dividend security.

Dividends Well Covered by Cash Flow?

The criterion evaluates whether Hartford Financial Services Group's dividends are adequately covered by its cash flow. A higher ratio indicates greater safety for dividend payouts.

Hartford Financial Services Group's dividend coverage ratio over the past twenty years shows the percentage of free cash flow that is used to pay dividends, ranging from roughly 5% to 18%. The company consistently keeps its payout ratio below 20%, which is a strong indication that the dividends are well covered by the cash flow. For instance, in the most recent year 2023, with a coverage ratio of about 13.7%, the free cash flow was able to comfortably cover the dividends. This historical trend suggests prudent financial management concerning dividend payouts, making the dividend payments relatively safe for shareholders. Maintaining a ratio well below 100% reduces the risk associated with dividend payments, even in potential economic downturns.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are crucial as they provide a predictable income stream, mitigating the risks associated with market volatility and economic downturns for investors.

Analyzing the dividend per share (DPS) data of Hartford Financial Services Group (HIG) over the past 20 years, there are notable fluctuations. From 2003 to 2007, HIG's DPS experienced consistent growth, peaking at $2.03 in 2007. However, the 2008 financial crisis led to a drastic DPS reduction to $0.2 by 2009, over 90% decrease. This instability persisted until 2012 when dividends began to recover gradually, reaching $1.745 by 2023, displaying a stable upward trend in the latter decade. Despite a significant drop in 2008-2009, since it wasn't over 20% from the previous year and dividends have been steadily growing, thus improving their overall stability and reliability. However, for an income-focused investor, the dramatic reduction during the economic crisis raises considerations about the company's vulnerability to extreme market conditions.

Dividends Paid for Over 25 Years?

The criterion assesses if a company has paid dividends consistently for over 25 years, showcasing its financial stability and commitment to returning value to shareholders.

Across 1998 to 2023, Hartford Financial Services Group has demonstrated a strong track record of paying dividends. In critical times, such as around the 2008 financial crisis, the dividend per share dropped significantly to $0.2 in 2009 and 2010 from $2.03 in 2008. However, it’s notable that the company resumed increasing its dividends post-2010, consistently growing from $0.2 to $1.745 by 2023. This trend signifies resilience and a robust recovery, making HIG a reliable dividend payer, which is a positive sign for long-term investors. The commitment to regular dividends for over 25 years underscores financial health and shareholder focus, marking this trend as good.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate the company's commitment to returning value to its shareholders. A consistent history of repurchase programs may positively affect share prices and investor confidence.

Over the past 20 years, Hartford Financial Services Group (HIG) has consistently engaged in stock repurchase programs, with 11 out of the 21 years (from 2003 to 2023) showing reliable repurchase activity. This indicates that the company is dedicated to returning value to its shareholders. For instance, the number of shares decreased from 481.5 million in 2010 to 307.1 million in 2023, even with a brief increase during the financial crisis in 2008 and 2011. The average repurchase rate of 0.9907 further underscores a consistent trend of reducing outstanding shares, boosting earnings per share, and enhancing shareholder value. This trend is beneficial as it signifies financial strength and a shareholder-friendly approach.