Yahoo Finance It Might Not Be A Great Idea To Buy Halliburton Company (NYSE:HAL) For Its Next Dividend
Halliburton Company (NYSE:HAL) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 3rd of September in order to receive the dividend, which the company will pay on the 25th of September.
Halliburton's next dividend payment will be US$0.18 per share, and in the last 12 months, the company paid a total of US$0.72 per share. Based on the last year's worth of payments, Halliburton has a trailing yield of 3.9% on the current stock price of $18.53. If you buy this business for its dividend, you should have an idea of whether Halliburton's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Halliburton
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. Halliburton paid out a comfortable 47% of its profit last year. A useful secondary check can be to evaluate whether Halliburton generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 272% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
While Halliburton's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Halliburton's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. 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 discomforted by Halliburton's 8.3% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
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, Halliburton has lifted its dividend by approximately 7.2% a year on average.
The Bottom Line
Is Halliburton worth buying for its dividend? Halliburton's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Halliburton.
Ever wonder what the future holds for Halliburton? See what the 29 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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