Why You Might Be Interested In Hamilton Beach Brands Holding Company (NYSE:HBB) For Its Upcoming Dividend
It looks like Hamilton Beach Brands Holding Company (NYSE:HBB) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 30th of November, you won't be eligible to receive this dividend, when it is paid on the 15th of December.
Hamilton Beach Brands Holding's upcoming dividend is US$0.095 a share, following on from the last 12 months, when the company distributed a total of US$0.38 per share to shareholders. Based on the last year's worth of payments, Hamilton Beach Brands Holding has a trailing yield of 1.9% on the current stock price of $20.16. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Hamilton Beach Brands Holding has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Hamilton Beach Brands Holding
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. Hamilton Beach Brands Holding paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 21% of its free cash flow in the last year.
It's positive to see that Hamilton Beach Brands Holding'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 Hamilton Beach Brands Holding paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Hamilton Beach Brands Holding, with earnings per share up 7.3% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, three years ago, Hamilton Beach Brands Holding has lifted its dividend by approximately 3.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Hamilton Beach Brands Holding an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Hamilton Beach Brands Holding is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Hamilton Beach Brands Holding is halfway there. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks Hamilton Beach Brands Holding is facing. In terms of investment risks, we've identified 2 warning signs with Hamilton Beach Brands Holding and understanding them should be part of your investment process.
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.
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