Hillenbrand's (NYSE:HI) Dividend Will Be $0.22
Hillenbrand, Inc. (NYSE:HI) has announced that it will pay a dividend of $0.22 per share on the 29th of September. This means the dividend yield will be fairly typical at 2.1%.
See our latest analysis for Hillenbrand
Hillenbrand's Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Hillenbrand's dividend was only 28% of earnings, however it was paying out 125% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
EPS is set to fall by 21.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 36%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Hillenbrand 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 $0.78 in 2013 to the most recent total annual payment of $0.88. This means that it has been growing its distributions at 1.2% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Hillenbrand has grown earnings per share at 23% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hillenbrand's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Hillenbrand (of which 2 shouldn't be ignored!) 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.
