Huntington Ingalls Industries, Inc. (NYSE:HII) Passed Our Checks, And It's About To Pay A US$1.18 Dividend
Huntington Ingalls Industries, Inc. (NYSE:HII) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Huntington Ingalls Industries' shares before the 24th of February in order to receive the dividend, which the company will pay on the 11th of March.
The company's upcoming dividend is US$1.18 a share, following on from the last 12 months, when the company distributed a total of US$4.72 per share to shareholders. Based on the last year's worth of payments, Huntington Ingalls Industries stock has a trailing yield of around 2.5% on the current share price of $186.09. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Huntington Ingalls Industries has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Huntington Ingalls Industries
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Huntington Ingalls Industries paid out a comfortable 34% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Huntington Ingalls Industries'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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Huntington Ingalls Industries, with earnings per share up 2.1% on average over the last five years. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, nine years ago, Huntington Ingalls Industries has lifted its dividend by approximately 32% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Has Huntington Ingalls Industries got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Huntington Ingalls Industries is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Huntington Ingalls Industries is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Huntington Ingalls Industries for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Huntington Ingalls Industries that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
