Yahoo Finance Hillenbrand (NYSE:HI) Has Announced A Dividend Of $0.2225
The board of Hillenbrand, Inc. (NYSE:HI) has announced that it will pay a dividend on the 28th of June, with investors receiving $0.2225 per share. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.
See our latest analysis for Hillenbrand
Hillenbrand's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Hillenbrand was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.
The next year is set to see EPS grow by 164.2%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.
Hillenbrand Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $0.78, compared to the most recent full-year payment of $0.89. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Hillenbrand's earnings per share has shrunk at 13% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Hillenbrand is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Hillenbrand (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
