Yahoo Finance Hill & Smith (LON:HILS) Is Increasing Its Dividend To £0.22
Hill & Smith PLC (LON:HILS) will increase its dividend from last year's comparable payment on the 7th of July to £0.22. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Hill & Smith
Hill & Smith's Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Hill & Smith's dividend was only 52% of earnings, however it was paying out 98% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Over the next year, EPS is forecast to expand by 49.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.15 in 2013, and the most recent fiscal year payment was £0.35. This means that it has been growing its distributions at 8.8% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Hill & Smith might have put its house in order since then, but we remain cautious.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Hill & Smith hasn't seen much change in its earnings per share over the last five years.
The Dividend Could Prove To Be Unreliable
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. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Hill & Smith that investors should take into consideration. 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.
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