Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Heritage Insurance Holdings, Inc. (NYSE:HRTG) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 13th of December, you won’t be eligible to receive this dividend, when it is paid on the 3rd of January.
Heritage Insurance Holdings’s next dividend payment will be US$0.06 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Based on the last year’s worth of payments, Heritage Insurance Holdings has a trailing yield of 1.8% on the current stock price of $13.27. If you buy this business for its dividend, you should have an idea of whether Heritage Insurance Holdings’s dividend is reliable and sustainable. So we need to investigate whether Heritage Insurance Holdings can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Heritage Insurance Holdings’s payout ratio is modest, at just 35% of profit.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Heritage Insurance Holdings’s earnings per share have fallen at approximately 22% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Heritage Insurance Holdings has delivered an average of 4.7% per year annual increase in its dividend, based on the past four years of dividend payments.
Is Heritage Insurance Holdings an attractive dividend stock, or better left on the shelf? Heritage Insurance Holdings’s earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
Wondering what the future holds for Heritage Insurance Holdings? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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