Yahoo Finance Hill & Smith Holdings' (LON:HILS) Upcoming Dividend Will Be Larger Than Last Year's
Hill & Smith Holdings PLC (LON:HILS) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of January to £0.13. Although the dividend is now higher, the yield is only 3.3%, which is below the industry average.
View our latest analysis for Hill & Smith Holdings
Hill & Smith Holdings' Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. The last payment was quite easily covered by earnings, but it made up 112% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Looking forward, earnings per share is forecast to rise by 32.2% over the next year. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from £0.132 total annually to £0.32. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Dividend Growth May Be Hard To Achieve
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Hill & Smith Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Growth of 1.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Hill & Smith Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
