Is Hunting plc (LON:HTG) A Smart Choice For Dividend Investors?

A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Hunting plc (LON:HTG) has paid dividends to shareholders, and these days it yields 1.2%. Does Hunting tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for Hunting

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

LSE:HTG Historical Dividend Yield December 10th 18

How well does Hunting fit our criteria?

Hunting has a trailing twelve-month payout ratio of 21%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 25%, leading to a dividend yield of around 2.2%. Moreover, EPS should increase to $0.44. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Hunting fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

In terms of its peers, Hunting produces a yield of 1.2%, which is on the low-side for Energy Services stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Hunting for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for HTG’s future growth? Take a look at our free research report of analyst consensus for HTG’s outlook.

2. Valuation: What is HTG worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HTG is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.