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Why You Should Leave Harwood Wealth Management Group plc (LON:HW.)'s Upcoming Dividend On The Shelf

Simply Wall St

Harwood Wealth Management Group plc (LON:HW.) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 24th of October will not receive this dividend, which will be paid on the 8th of November.

Harwood Wealth Management Group's next dividend payment will be UK£0.01 per share, and in the last 12 months, the company paid a total of UK£0.04 per share. Last year's total dividend payments show that Harwood Wealth Management Group has a trailing yield of 2.6% on the current share price of £1.325. 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 Harwood Wealth Management Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Harwood Wealth Management Group

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. Harwood Wealth Management Group paid out 133% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see how much of its profit Harwood Wealth Management Group paid out over the last 12 months.

AIM:HW. Historical Dividend Yield, October 20th 2019

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Harwood Wealth Management Group's flat earnings 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. Harwood Wealth Management Group has delivered an average of 21% per year annual increase in its dividend, based on the past three years of dividend payments.

Final Takeaway

Is Harwood Wealth Management Group worth buying for its dividend? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 133% of last year's earnings. Harwood Wealth Management Group doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Want to learn more about Harwood Wealth Management Group's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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. Thank you for reading.