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It Might Not Be A Great Idea To Buy Hurco Companies, Inc. (NASDAQ:HURC) For Its Next Dividend

Simply Wall St
·3 mins read

Hurco Companies, Inc. (NASDAQ:HURC) stock is about to trade ex-dividend in 4 days. If you purchase the stock on or after the 1st of October, you won't be eligible to receive this dividend, when it is paid on the 16th of October.

Hurco Companies's next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.52 per share. Looking at the last 12 months of distributions, Hurco Companies has a trailing yield of approximately 1.8% on its current stock price of $29.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Hurco Companies

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hurco Companies lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Hurco Companies didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.

Click here to see how much of its profit Hurco Companies paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Hurco Companies 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past seven years, Hurco Companies has increased its dividend at approximately 15% a year on average.

Get our latest analysis on Hurco Companies's balance sheet health here.

Final Takeaway

Is Hurco Companies an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. Bottom line: Hurco Companies has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Although, if you're still interested in Hurco Companies and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for Hurco Companies (1 is concerning!) that you ought to be aware of before buying the shares.

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.

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.