Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Hastings Group Holdings plc (LON:HSTG) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 16th of April in order to receive the dividend, which the company will pay on the 29th of May.
Hastings Group Holdings’s next dividend payment will be UK£0.055 per share. Last year, in total, the company distributed UK£0.10 to shareholders. Based on the last year’s worth of payments, Hastings Group Holdings has a trailing yield of 5.5% on the current stock price of £1.833. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Last year Hastings Group Holdings paid out 95% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It’s encouraging to see Hastings Group Holdings has grown its earnings rapidly, up 35% a year for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Hastings Group Holdings has delivered an average of 46% per year annual increase in its dividend, based on the past four years of dividend payments. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Hastings Group Holdings an attractive dividend stock, or better left on the shelf? It’s been growing earnings per share at a pleasant rate, although its dividend payout was not well covered by earnings. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we’re on the fence about its dividend prospects.
So if you want to do more digging on Hastings Group Holdings, you’ll find it worthwhile knowing the risks that this stock faces. In terms of investment risks, we’ve identified 2 warning signs with Hastings Group Holdings 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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