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Hasbro (NASDAQ:HAS) Is Increasing Its Dividend To US$0.70

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Hasbro, Inc. (NASDAQ:HAS) will increase its dividend on the 16th of May to US$0.70, which is 2.9% higher than last year. This makes the dividend yield 3.3%, which is above the industry average.

See our latest analysis for Hasbro

Hasbro's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 88% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 54.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

historic-dividend
historic-dividend

Hasbro Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from US$1.20 to US$2.72. This implies that the company grew its distributions at a yearly rate of about 8.5% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Hasbro has seen earnings per share falling at 6.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Hasbro's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Hasbro's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Hasbro that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.