Three Days Left To Buy Hyster-Yale Materials Handling, Inc. (NYSE:HY) Before The Ex-Dividend Date
It looks like Hyster-Yale Materials Handling, Inc. (NYSE:HY) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Hyster-Yale Materials Handling's shares before the 28th of May in order to be eligible for the dividend, which will be paid on the 15th of June.
The company's next dividend payment will be US$0.32 per share, on the back of last year when the company paid a total of US$1.27 to shareholders. Based on the last year's worth of payments, Hyster-Yale Materials Handling has a trailing yield of 1.7% on the current stock price of $76.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Hyster-Yale Materials Handling can afford its dividend, and if the dividend could grow.
View our latest analysis for Hyster-Yale Materials Handling
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 78% 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. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Hyster-Yale Materials Handling generated enough free cash flow to afford its dividend. Luckily it paid out just 17% of its free cash flow last year.
It's positive to see that Hyster-Yale Materials Handling'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 how much of its profit Hyster-Yale Materials Handling paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Hyster-Yale Materials Handling's earnings per share have fallen at approximately 19% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past nine years, Hyster-Yale Materials Handling has increased its dividend at approximately 2.9% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Hyster-Yale Materials Handling is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
Final Takeaway
Should investors buy Hyster-Yale Materials Handling for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's hard to get excited about Hyster-Yale Materials Handling from a dividend perspective.
So if you want to do more digging on Hyster-Yale Materials Handling, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 4 warning signs for Hyster-Yale Materials Handling and you should be aware of them before buying any shares.
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 (at) simplywallst.com.
