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Do These 3 Checks Before Buying Helmerich & Payne, Inc. (NYSE:HP) For Its Upcoming Dividend

Simply Wall St
·4 min read

Helmerich & Payne, Inc. (NYSE:HP) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 12th of November in order to be eligible for this dividend, which will be paid on the 1st of December.

Helmerich & Payne's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.00 per share. Based on the last year's worth of payments, Helmerich & Payne has a trailing yield of 6.6% on the current stock price of $15.15. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Helmerich & Payne has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Helmerich & Payne

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Helmerich & Payne's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Helmerich & Payne didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out more than half (67%) of its free cash flow in the past year, which is within an average range for most companies.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Helmerich & Payne was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Helmerich & Payne has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Remember, you can always get a snapshot of Helmerich & Payne's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Helmerich & Payne an attractive dividend stock, or better left on the shelf? It's hard to get used to Helmerich & Payne paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Helmerich & Payne.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Helmerich & Payne. For example, we've found 2 warning signs for Helmerich & Payne (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.