Yahoo Finance Hyster-Yale Materials Handling (NYSE:HY) Is Paying Out A Larger Dividend Than Last Year
The board of Hyster-Yale Materials Handling, Inc. (NYSE:HY) has announced that the dividend on 15th of June will be increased to $0.325, which will be 0.8% higher than last year's payment of $0.323 which covered the same period. This will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Hyster-Yale Materials Handling's stock price has increased by 60% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Hyster-Yale Materials Handling
Hyster-Yale Materials Handling's Distributions May Be Difficult To Sustain
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even in the absence of profits, Hyster-Yale Materials Handling is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
Analysts expect the EPS to grow by 75.6% over the next 12 months. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.
Hyster-Yale Materials Handling Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $1.00 in 2013 to the most recent total annual payment of $1.29. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Hyster-Yale Materials Handling's EPS has fallen by approximately 62% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Hyster-Yale Materials Handling's payments are rock solid. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Hyster-Yale Materials Handling has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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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