Federated Hermes (FHI) 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Federated Hermes (FHI) is headquartered in Pittsburgh, and is in the Finance sector. The stock has seen a price change of 5.26% since the start of the year. Currently paying a dividend of $0.38 per share, the company has a dividend yield of 2.77%. In comparison, the Financial - Investment Management industry's yield is 2.92%, while the S&P 500's yield is 1.42%.

Looking at dividend growth, the company's current annualized dividend of $1.52 is up 14.3% from last year. Over the last 5 years, Federated Hermes has increased its dividend 3 times on a year-over-year basis for an average annual increase of 0.78%. 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. Federated Hermes's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FHI for this fiscal year. The Zacks Consensus Estimate for 2026 is $5.10 per share, representing a year-over-year earnings growth rate of 2.41%.

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.

For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, FHI 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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This article originally published on Zacks Investment Research (zacks.com).

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