Yahoo Finance Here's What We Like About Huntington Ingalls Industries' (NYSE:HII) Upcoming Dividend
Huntington Ingalls Industries, Inc. (NYSE:HII) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Huntington Ingalls Industries' shares on or after the 23rd of February, you won't be eligible to receive the dividend, when it is paid on the 10th of March.
The company's next dividend payment will be US$1.24 per share, and in the last 12 months, the company paid a total of US$4.96 per share. Based on the last year's worth of payments, Huntington Ingalls Industries stock has a trailing yield of around 2.2% on the current share price of $224.54. If you buy this business for its dividend, you should have an idea of whether Huntington Ingalls Industries's dividend is reliable and sustainable. As a result, readers should always check whether Huntington Ingalls Industries has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Huntington Ingalls Industries
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Huntington Ingalls Industries paid out a comfortable 33% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Huntington Ingalls Industries'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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Huntington Ingalls Industries earnings per share are up 6.7% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Huntington Ingalls Industries has delivered 29% dividend growth per year on average over the past 10 years. 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.
Final Takeaway
Is Huntington Ingalls Industries worth buying for its dividend? Earnings per share growth has been growing somewhat, and Huntington Ingalls Industries is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Huntington Ingalls Industries is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
So while Huntington Ingalls Industries looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Huntington Ingalls Industries has 1 warning sign we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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