Yahoo Finance Herc Holdings Inc. (NYSE:HRI) Passed Our Checks, And It's About To Pay A US$0.665 Dividend
Readers hoping to buy Herc Holdings Inc. (NYSE:HRI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Herc Holdings' shares on or after the 31st of May will not receive the dividend, which will be paid on the 14th of June.
The company's next dividend payment will be US$0.665 per share, and in the last 12 months, the company paid a total of US$2.66 per share. Based on the last year's worth of payments, Herc Holdings stock has a trailing yield of around 1.8% on the current share price of US$147.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Herc Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Herc Holdings is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Herc Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Herc Holdings has grown its earnings rapidly, up 38% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last three years, Herc Holdings has lifted its dividend by approximately 10.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Herc Holdings? Earnings per share have grown at a nice rate in recent times and over the last year, Herc Holdings paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Herc Holdings, and we would prioritise taking a closer look at it.
In light of that, while Herc Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 3 warning signs for Herc Holdings (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
