Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Huntington Bancshares Incorporated (NASDAQ:HBAN) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 16th of September will not receive the dividend, which will be paid on the 1st of October.
Huntington Bancshares's next dividend payment will be US$0.15 per share, and in the last 12 months, the company paid a total of US$0.60 per share. Calculating the last year's worth of payments shows that Huntington Bancshares has a trailing yield of 4.2% on the current share price of $14.37. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Huntington Bancshares can afford its dividend, and if the dividend could grow.
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. Huntington Bancshares paid out a comfortable 44% of its profit last year.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Huntington Bancshares's earnings per share have been growing at 12% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Huntington Bancshares has lifted its dividend by approximately 1.2% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Should investors buy Huntington Bancshares for the upcoming dividend? Companies like Huntington Bancshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Huntington Bancshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Wondering what the future holds for Huntington Bancshares? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.