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We Wouldn't Be Too Quick To Buy Helmerich & Payne, Inc. (NYSE:HP) Before It Goes Ex-Dividend

Simply Wall St
·3 min read

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Helmerich & Payne, Inc. (NYSE:HP) is about to trade ex-dividend in the next four days. You can purchase shares before the 14th of August in order to receive the dividend, which the company will pay on the 31st of August.

Helmerich & Payne's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Calculating the last year's worth of payments shows that Helmerich & Payne has a trailing yield of 5.4% on the current share price of $18.44. 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 Helmerich & Payne can afford its dividend, and if the dividend could grow.

View 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 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. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. 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. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.

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

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Helmerich & Payne has lifted its dividend by approximately 17% a year on average.

Remember, you can always get a snapshot of Helmerich & Payne's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Helmerich & Payne worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Helmerich & Payne is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Helmerich & Payne as an investment, you'll find it beneficial to know what risks this stock is facing. For example, Helmerich & Payne has 2 warning signs (and 1 which is significant) we think you should know about.

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.

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.