U.S. Markets open in 54 mins
  • S&P Futures

    -11.00 (-0.30%)
  • Dow Futures

    -135.00 (-0.45%)
  • Nasdaq Futures

    -42.00 (-0.34%)
  • Russell 2000 Futures

    -7.80 (-0.42%)
  • Crude Oil

    -0.26 (-0.58%)
  • Gold

    +7.40 (+0.41%)
  • Silver

    -0.01 (-0.04%)

    -0.0003 (-0.0242%)
  • 10-Yr Bond

    -0.0100 (-1.07%)
  • Vix

    +0.50 (+2.43%)

    -0.0102 (-0.7619%)

    +0.2300 (+0.2205%)

    +216.39 (+1.14%)
  • CMC Crypto 200

    -3.66 (-0.96%)
  • FTSE 100

    +14.14 (+0.22%)
  • Nikkei 225

    +13.44 (+0.05%)

It Might Not Be A Great Idea To Buy Helmerich & Payne, Inc. (NYSE:HP) For Its Next Dividend

Simply Wall St
·3 min read

Helmerich & Payne, Inc. (NYSE:HP) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 7th of February will not receive this dividend, which will be paid on the 2nd of March.

Helmerich & Payne's next dividend payment will be US$0.71 per share, on the back of last year when the company paid a total of US$2.84 to shareholders. Looking at the last 12 months of distributions, Helmerich & Payne has a trailing yield of approximately 7.0% on its current stock price of $40.55. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Helmerich & Payne

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Helmerich & Payne reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 79% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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

NYSE:HP Historical Dividend Yield, February 3rd 2020
NYSE:HP Historical Dividend Yield, February 3rd 2020

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Helmerich & Payne was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, Helmerich & Payne has lifted its dividend by approximately 30% a year on average.

Get our latest analysis on Helmerich & Payne's balance sheet health here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Helmerich & Payne? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Helmerich & Payne has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Wondering what the future holds for Helmerich & Payne? See what the 20 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.