Hamilton Beach Brands Holding Company (NYSE:HBB) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 27th of February will not receive this dividend, which will be paid on the 13th of March.
Hamilton Beach Brands Holding's upcoming dividend is US$0.09 a share, following on from the last 12 months, when the company distributed a total of US$0.36 per share to shareholders. Based on the last year's worth of payments, Hamilton Beach Brands Holding stock has a trailing yield of around 2.4% on the current share price of $14.77. 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! So we need to investigate whether Hamilton Beach Brands Holding can afford its dividend, and if the dividend could grow.
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. Hamilton Beach Brands Holding paid out a comfortable 38% of its profit last year. A useful secondary check can be to evaluate whether Hamilton Beach Brands Holding generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Hamilton Beach Brands Holding's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Hamilton Beach Brands Holding's earnings per share have fallen at approximately 8.4% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, Hamilton Beach Brands Holding has increased its dividend at approximately 2.9% a year on average.
Has Hamilton Beach Brands Holding got what it takes to maintain its dividend payments? Hamilton Beach Brands Holding has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Hamilton Beach Brands Holding from a dividend perspective.
Keen to explore more data on Hamilton Beach Brands Holding's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.
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