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Hillenbrand, Inc. (NYSE:HI) stock is about to trade ex-dividend in four days. Investors can purchase shares before the 15th of September in order to be eligible for this dividend, which will be paid on the 30th of September.
Hillenbrand's next dividend payment will be US$0.21 per share, and in the last 12 months, the company paid a total of US$0.85 per share. Looking at the last 12 months of distributions, Hillenbrand has a trailing yield of approximately 2.8% on its current stock price of $30.57. 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 Hillenbrand has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hillenbrand reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 Hillenbrand 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 distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Hillenbrand reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Hillenbrand has increased its dividend at approximately 1.3% a year on average.
We update our analysis on Hillenbrand every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Should investors buy Hillenbrand for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Hillenbrand is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that in mind though, if the poor dividend characteristics of Hillenbrand don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 4 warning signs for Hillenbrand (2 are a bit unpleasant!) that deserve your attention before investing in the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.
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