There is a lot to be liked about Helmerich & Payne Inc (NYSE:HP) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 4.1% to shareholders, making it a relatively attractive dividend stock. Does Helmerich & Payne tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Helmerich & Payne fit our criteria?
Helmerich & Payne has a trailing twelve-month payout ratio of 65.8%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 118%, leading to a dividend yield of 4.1%. However, EPS is forecasted to fall to $2.11 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. HP has increased its DPS from $0.20 to $2.84 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes HP a true dividend rockstar.
Compared to its peers, Helmerich & Payne produces a yield of 4.1%, which is high for Energy Services stocks.
With these dividend metrics in mind, I definitely rank Helmerich & Payne as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HP’s future growth? Take a look at our free research report of analyst consensus for HP’s outlook.
- Valuation: What is HP 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 HP 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 firstname.lastname@example.org.