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Should Income Investors Look At Huntington Bancshares Incorporated (NASDAQ:HBAN) Before Its Ex-Dividend?

Simply Wall St
·3 mins read

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Huntington Bancshares Incorporated (NASDAQ:HBAN) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 16th of September, you won't be eligible to receive this dividend, when it is paid on the 1st of October.

Huntington Bancshares's upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.60 per share to shareholders. Looking at the last 12 months of distributions, Huntington Bancshares has a trailing yield of approximately 6.3% on its current stock price of $9.58. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Huntington Bancshares can afford its dividend, and if the dividend could grow.

See our latest analysis for Huntington Bancshares

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 76% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Huntington Bancshares's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Huntington Bancshares has delivered 31% dividend growth per year on average over the past 10 years.

To Sum It Up

Has Huntington Bancshares got what it takes to maintain its dividend payments? Huntington Bancshares's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.

Curious what other investors think of Huntington Bancshares? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.