Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Hyster-Yale Materials Handling Inc (NYSE:HY) has returned to shareholders over the past 6 years, an average dividend yield of 2.00% annually. Should it have a place in your portfolio? Let’s take a look at Hyster-Yale Materials Handling in more detail.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- 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 does Hyster-Yale Materials Handling fare?
The current trailing twelve-month payout ratio for the stock is 58.03%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect HY’s payout to fall to 25.92% of its earnings, which leads to a dividend yield of 2.84%. However, EPS should increase to $4.72, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Hyster-Yale Materials Handling 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, Hyster-Yale Materials Handling has a yield of 2.13%, which is on the low-side for Machinery stocks.
If Hyster-Yale Materials Handling is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three relevant aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HY’s future growth? Take a look at our free research report of analyst consensus for HY’s outlook.
- Valuation: What is HY 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 HY 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.
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.