Lincoln National (LNC) is a Top Dividend Stock Right Now: Should You Buy?

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

Lincoln National in Focus

Headquartered in Radnor, Lincoln National (LNC) is a Finance stock that has seen a price change of -53.47% so far this year. The insurance and retirement business is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 5.83% compared to the Insurance - Life Insurance industry's yield of 0.92% and the S&P 500's yield of 2.41%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 8.1% from last year. Over the last 5 years, Lincoln National has increased its dividend 5 times on a year-over-year basis for an average annual increase of 15.62%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Lincoln National's payout ratio is 16%, which means it paid out 16% of its trailing 12-month EPS as dividend.

LNC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2020 is $9.82 per share, with earnings expected to increase 124.20% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. With that in mind, LNC 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).

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