Yahoo Finance Hill & Smith (LON:HILS) Is Increasing Its Dividend To £0.28
Hill & Smith PLC (LON:HILS) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of July to £0.28. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Hill & Smith
Hill & Smith's Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Hill & Smith's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 41.7%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from £0.16 total annually to £0.43. This means that it has been growing its distributions at 10% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Has Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Hill & Smith has been growing its earnings per share at 7.4% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Hill & Smith that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
