Updated 3/10/25
Horace Mann Educators Corporation (HMN) has carved out a unique position in the insurance market, catering specifically to teachers and their families. Founded in 1945, the company provides auto, property, life, and retirement solutions tailored to the needs of educators. While the insurance industry can be cyclical, HMN’s focus on a stable customer base gives it an edge when it comes to consistency.
With a market cap of around $1.71 billion and a stock price near $40.75, this isn’t the kind of stock that makes headlines for explosive growth. Instead, it’s a steady, income-focused investment that appeals to dividend investors looking for reliability and predictability. Its strong cash flows and long history of rewarding shareholders make it worth a closer look.
📊 Key Dividend Metrics
💰 Forward Dividend Rate: $1.40
📈 Forward Dividend Yield: 3.35%
📆 Ex-Dividend Date: March 17, 2025
🔄 5-Year Average Yield: 3.48%
📊 Payout Ratio: 54.84%
📆 Dividend Growth Streak: Over 25 years
💵 Trailing Annual Dividend Rate: $1.36
📊 Dividend Safety Score: Reasonable, but dependent on financial performance
Dividend Overview
For investors who prioritize income, HMN offers a compelling case. The stock’s forward dividend yield of 3.35% aligns well with its historical average, reinforcing its reputation as a dependable payer. With over two decades of uninterrupted dividend payments, this is the kind of stock that attracts investors seeking stability.
One of the key things to watch with dividend stocks is the payout ratio. At 54.84%, HMN is in a healthy range—high enough to reward shareholders but not so high that it raises concerns about sustainability. That means the company isn’t stretching itself too thin to maintain payouts. However, as with any insurance company, fluctuations in claims and interest rates can impact future earnings, making ongoing monitoring essential.
Dividend Growth and Safety
While HMN has a strong dividend history, the growth rate in recent years has been modest. This isn’t the type of stock that’s going to double its payout overnight, but it has demonstrated a commitment to gradually increasing dividends when conditions allow.
Several factors play into the company’s ability to maintain and grow its dividend. The payout ratio sits at a reasonable level, indicating that there’s room for moderate increases. Strong cash flow from operations, at $452.1 million, provides further support.
However, there are some areas to keep an eye on. The company’s debt load is relatively high, with a debt-to-equity ratio of 120.27%. While this isn’t a red flag on its own, it does limit financial flexibility. Earnings growth has also been slightly negative, with a -3.3% year-over-year decline in the most recent quarter. That doesn’t mean the dividend is in danger, but it does suggest that large increases may not be on the horizon until earnings pick up.
Chart Analysis
Price Action and Trend
The stock is trading at 41.73, showing a relatively strong upward trend over the past several months. There was a clear breakout above $37.50 in early November, followed by a strong rally that pushed the price above $40. Since then, the stock has been consolidating near its recent highs, with some fluctuations but no significant breakdowns.
The 50-day moving average is trending higher and remains well above the 200-day moving average, which is a bullish sign. The gap between these two averages widened significantly after the breakout in November, confirming strong upward momentum. The 200-day moving average continues to slope upwards, suggesting that the long-term trend remains intact.
Moving Averages
The 50-day moving average is currently providing dynamic support, with recent pullbacks finding buyers near this level. The 200-day moving average sits much lower, reinforcing that the long-term trend is strong, and any deeper pullbacks would likely find support near that level.
In mid-2024, the stock experienced a bullish crossover, where the 50-day moving average crossed above the 200-day moving average. This event often signals a shift toward a more sustained uptrend, and in this case, the price has largely remained above both moving averages since then.
Volume and Market Participation
Volume has been relatively steady, with occasional spikes on strong up days. There was a noticeable surge in volume in October and November, coinciding with the sharp move higher. Since then, volume has tapered off slightly but remains within normal ranges.
A higher volume breakout would be an encouraging sign for further upside, while declining volume on upward moves could signal a lack of conviction among buyers.
RSI and Momentum
The Relative Strength Index (RSI) is sitting in the upper range but hasn’t reached extreme overbought levels. This suggests that while the stock has been strong, it hasn’t become overheated to the point of an immediate reversal.
There was a brief period in January where the RSI approached overbought conditions, but since then, it has moderated slightly. As long as RSI remains above 50, it indicates that buyers are still in control. If RSI were to dip below this level, it could suggest that momentum is fading.
Recent Candlestick Behavior
The last five trading sessions have shown mixed price action. There have been some long upper wicks on recent candles, indicating that sellers are stepping in at higher levels. However, there hasn’t been any major rejection or sharp downturn. The price remains relatively stable near the 41.50-42.00 range, suggesting that buyers are still present, but there is some hesitation at higher prices.
The presence of these upper wicks suggests that the stock may need to consolidate further before making another push higher. If the stock can decisively close above 42.50, it could open the door for another leg up. On the other hand, if sellers continue to step in at these levels, a pullback toward the 50-day moving average around 39.50 wouldn’t be surprising.
Analyst Ratings
📈 Upgrades:
🔹 On January 29, 2024, Keefe, Bruyette & Woods upgraded HMN from Market Perform to Outperform, setting a price target of $40. 🔼 This upgrade was driven by strong financial performance and positive growth potential in the educational insurance sector. Analysts noted that improving underwriting margins and steady premium growth supported their bullish outlook.
📉 Downgrades:
🔻 On November 12, 2024, Keefe, Bruyette & Woods downgraded HMN from Outperform to Market Perform, adjusting the price target from $39 to $44. 📉 The downgrade reflected concerns about rising competition in the insurance space and potential challenges in maintaining profitability amid shifting market dynamics. Analysts also pointed to macroeconomic conditions that could weigh on investment income.
🎯 Consensus Price Target:
The current average analyst price target for HMN stands at $44.50, with a general Hold rating. ⚖️ While some analysts see upside potential driven by steady policy growth and a stable dividend, others remain cautious due to sector-wide challenges and potential margin pressures. The stock remains in a balanced position, with room for movement based on upcoming earnings performance and broader industry trends.
Earnings Report Summary
Horace Mann Educators Corporation wrapped up the year with solid financial results, showing steady growth and a strong performance across its business segments. The company’s latest earnings report highlighted increased revenues, improved profitability, and a positive outlook heading into 2025.
Full-Year Highlights
Total revenue for the year came in at $1.595 billion, a nearly 7% increase from the previous year. This steady rise in revenue reflects the company’s ability to grow its customer base and effectively manage its insurance portfolio. Net income more than doubled, reaching $102.8 million, compared to $45 million in the prior year. That’s a big jump, signaling that cost efficiencies and strong underwriting results are making an impact.
Core earnings per share (EPS) landed at $3.18, another significant improvement from last year. The company’s book value per share also climbed 9.5% to $31.51, reinforcing its financial stability.
Fourth-Quarter Performance
In the final quarter of the year, Horace Mann posted revenues of $409 million, up slightly from the same period in the previous year. Net income for the quarter was $38.2 million, just a bit lower than last year’s $39.5 million. However, core earnings surged to $67.6 million, or $1.62 per share, nearly double what was reported in the same quarter last year.
Strength in Key Segments
The Property & Casualty segment showed major improvements, with a combined ratio of 97.9% for the year. That’s a 15-point improvement from the prior year, meaning the company has been more efficient in managing claims and expenses. The Supplemental & Group Benefits division also remained a strong contributor, helping to diversify the company’s income stream and reduce reliance on just one area of business.
What’s Ahead for 2025
Looking forward, Horace Mann is expecting another strong year. The company is projecting core earnings per share to fall between $3.60 and $3.90 in 2025. Leadership is also targeting a double-digit return on equity, which signals confidence in continued profitability and growth.
Overall, the latest earnings report shows that Horace Mann is in a solid position. With disciplined underwriting, steady revenue growth, and improving financials, the company appears well-equipped to navigate market challenges while continuing to provide value to shareholders.
Financial Health and Stability
Financially, HMN presents a mixed picture. On the positive side, the company generates strong cash flow, which is essential for supporting both operations and dividends. Operating cash flow of $452.1 million gives it a solid foundation.
However, the company does carry a notable amount of debt. The debt-to-equity ratio of 120.27% is on the higher side, meaning that a larger portion of its capital structure is financed through borrowing. While manageable, this could become a headwind in a higher interest rate environment.
Profitability metrics also suggest that while HMN is stable, it’s not an exceptionally high-margin business. A return on equity of 8.35% and a return on assets of 0.71% indicate that while the company is generating a return, it’s not the most efficient in doing so. These figures are common in the insurance industry but reinforce that this is more of a slow-and-steady performer rather than a high-growth company.
Valuation and Stock Performance
Looking at valuation, HMN trades at a reasonable level compared to its historical averages and peers in the insurance sector.
The stock’s price-to-earnings (P/E) ratio of 16.83 suggests that it’s not overpriced, but it’s also not deeply undervalued. Its price-to-sales ratio of 1.12 and price-to-book ratio of 1.32 further support the idea that the stock is fairly valued at current levels.
Over the past year, HMN has traded in a range of $31.81 to $43.53, and at $40.75, it’s closer to the high end of that range. The 50-day moving average of $39.61 and 200-day moving average of $36.85 indicate that the stock has been in an uptrend, but the recent 2.35% drop suggests some short-term volatility.
With a beta of 0.27, HMN is a low-volatility stock, making it a good fit for investors who prefer steadier performance over more unpredictable swings.
Risks and Considerations
No investment is without risks, and HMN has a few that investors should be aware of.
🔺 Interest Rate Sensitivity: As an insurer, HMN relies on investment income, which is affected by changes in interest rates. A prolonged period of lower rates could put pressure on profitability.
📉 Earnings Decline: Recent earnings growth has been negative, with a -3.3% year-over-year decline. If this trend continues, it could limit the company’s ability to grow its dividend.
📊 Debt Load: With a debt-to-equity ratio above 120%, HMN carries more leverage than some investors might prefer. While manageable, it’s something to watch, especially if borrowing costs rise.
🌪️ Claims Volatility: As an insurance company, HMN is always at risk of higher-than-expected claims, whether from natural disasters or other unforeseen events. This can impact profitability in ways that are hard to predict.
📊 Limited Growth Potential: While HMN is a reliable dividend payer, it’s not a high-growth stock. Investors looking for substantial capital appreciation may need to look elsewhere.
Final Thoughts
Horace Mann Educators Corporation is a strong choice for income-focused investors who value stability over rapid growth. With a long track record of dividend payments, a reasonable payout ratio, and relatively low volatility, it fits well in a dividend portfolio.
However, investors should temper expectations for significant dividend growth, as the company’s debt levels and recent earnings trends suggest a more cautious approach in the near term. This is a stock that provides a steady yield but isn’t likely to deliver outsized returns.
For those looking for a dependable income-generating investment, HMN remains a solid option. Keeping an eye on earnings trends, interest rates, and debt management will be key to assessing its long-term prospects.
Recent Comments