The board of Hamilton Beach Brands Holding Company (NYSE:HBB) has announced that it will pay a dividend on the 15th of March, with investors receiving $0.105 per share. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.
Hamilton Beach Brands Holding's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Hamilton Beach Brands Holding's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
If the trend of the last few years continues, EPS will grow by 5.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.
Hamilton Beach Brands Holding Doesn't Have A Long Payment History
Hamilton Beach Brands Holding's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the dividend has gone from $0.34 total annually to $0.42. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Hamilton Beach Brands Holding hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Hamilton Beach Brands Holding has been growing its earnings per share at 5.9% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Hamilton Beach Brands Holding is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Hamilton Beach Brands Holding (of which 2 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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