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Shares of Hanesbrands Inc. (NYSE:HBI) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.15 per share, investors must have owned the shares prior to 13 May 2019, which is the last day the company's management will finalize their list of shareholders to which they will send dividend payments. What does this mean for current shareholders and potential investors? Below, I will explain how holding Hanesbrands can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
Here's how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% 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?
Does Hanesbrands pass our checks?
Hanesbrands has a trailing twelve-month payout ratio of 40%, which means that the dividend is covered by earnings. Going forward, analysts expect HBI's payout to remain around the same level at 37% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.7%. In addition to this, EPS should increase to $1.67.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 Hanesbrands as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Hanesbrands generates a yield of 3.4%, which is high for Luxury stocks but still below the market's top dividend payers.
If you are building an income portfolio, then Hanesbrands is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I've put together three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HBI’s future growth? Take a look at our free research report of analyst consensus for HBI’s outlook.
- Valuation: What is HBI 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 HBI is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
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 firstname.lastname@example.org. 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.