Should H&E Equipment Services Inc (NASDAQ:HEES) Be Part Of Your Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. H&E Equipment Services Inc (NASDAQ:HEES) has paid a dividend to shareholders in the last few years. It currently yields 4.6%. Does H&E Equipment Services tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for H&E Equipment Services
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share amount increased over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How does H&E Equipment Services fare?
The company currently pays out 29% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 45%, leading to a dividend yield of around 4.6%. However, EPS is forecasted to fall to $2.09 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view H&E Equipment Services as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, H&E Equipment Services generates a yield of 4.6%, which is high for Trade Distributors stocks.
Next Steps:
Keeping in mind the dividend characteristics above, H&E Equipment Services is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for HEES’s future growth? Take a look at our free research report of analyst consensus for HEES’s outlook.
Valuation: What is HEES worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HEES is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
