Should You Buy Hyster-Yale Materials Handling, Inc. (NYSE:HY) For Its Upcoming Dividend?
Hyster-Yale Materials Handling, Inc. (NYSE:HY) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Hyster-Yale Materials Handling's shares on or after the 30th of November, you won't be eligible to receive the dividend, when it is paid on the 15th of December.
The company's next dividend payment will be US$0.33 per share, on the back of last year when the company paid a total of US$1.30 to shareholders. Last year's total dividend payments show that Hyster-Yale Materials Handling has a trailing yield of 2.7% on the current share price of $47.89. If you buy this business for its dividend, you should have an idea of whether Hyster-Yale Materials Handling's dividend is reliable and sustainable. As a result, readers should always check whether Hyster-Yale Materials Handling has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Hyster-Yale Materials Handling
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hyster-Yale Materials Handling paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 26% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Hyster-Yale Materials Handling paid out over the last 12 months.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Hyster-Yale Materials Handling's earnings per share have been growing at 16% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Hyster-Yale Materials Handling has lifted its dividend by approximately 2.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Hyster-Yale Materials Handling is keeping back more of its profits to grow the business.
Final Takeaway
Is Hyster-Yale Materials Handling an attractive dividend stock, or better left on the shelf? Hyster-Yale Materials Handling has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Hyster-Yale Materials Handling and you should be aware of this before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
