Hargreaves Services' (LON:HSP) Upcoming Dividend Will Be Larger Than Last Year's
Hargreaves Services Plc (LON:HSP) will increase its dividend on the 30th of October to £0.18, which is 2.3% higher than last year's payment from the same period of £0.176. Despite this raise, the dividend yield of 4.3% is only a modest boost to shareholder returns.
View our latest analysis for Hargreaves Services
Hargreaves Services' Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Hargreaves Services was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 86.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was £0.178, compared to the most recent full-year payment of £0.206. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Hargreaves Services has impressed us by growing EPS at 86% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Hargreaves Services Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Hargreaves Services that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
