Image source: Hargreaves Lansdown plc
I'm not normally a dividend investor and I always like to reinvest what I receive into my portfolio. But when I find a great company that also provides a second income from dividends, that's a plus.
So I started with all the companies in the FTSE 250 and FTSE 100 indexes. Then, I filtered them based on specific parameters.
Here's one that I think could be up there with the best in terms of financials and dividends it pays.
Hargreaves Lansdown
I want to understand the company better before talking about dividends.
So, Hargreaves Lansdown (LSE:HL) is a UK-based financial services organization offering stockbroking and investment management services.
It is in the FTSE 100 index, which places it in the top 100 companies by listed value. London Stock Exchange.
While the company's stock price is down nearly 70% since the pandemic began, it is up more than 260% since it went public in 2007.
Management have presented in their 2023 annual report that they have £134 billion of the £3.1 trillion financial services market they could potentially tap into:
A closer look at its dividends
Hargreaves Lansdown has a dividend yield of 5.5% at the moment, meaning it pays out that percentage of the total investment in dividends.
There have also been no dividend reductions since 2016! That's music to my ears when I think about the possibility of generating passive income.
Here's a really useful visual chart plotting the history of the company's dividend yield since 2014:
Of course, dividends are never guaranteed and can fluctuate at any time, depending on board and management decisions.
A Christmas bargain?
Seeing the price so low right now could mean the stock is on sale for me just in time for Christmas.
For me, the proof of why buying shares at such a low value could be a good idea is a 10-year average annual earnings growth rate of 8.40%.
Furthermore, the average annual revenue growth rate over a year is 26%. I think that's awesome.
However, one of the weakest areas of the company's financials is its equity-to-assets ratio.
This is a ratio that I find very useful in describing a company's debt level.
The higher the ratio, the better.
For Hargreaves Lansdown, the ratio is 0.55. That's worse than 80% of more than 1,700 companies in the asset management business.
However, I think the overall picture for Hargreaves Lansdown presents me with a bargain opportunity if I were to focus on the dividend.
my verdict
Since I'm not normally a dividend investor, I won't be buying shares at this time because other companies have caught my attention.
However, I believe the company has a solid financial situation and is trading at a low price. I'm also impressed by the 5.5% dividend yield. So for those reasons, I put it on my watch list.
