Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Huntington Bancshares Incorporated (NASDAQ:HBAN) is about to go ex-dividend in just four days. You can purchase shares before the 16th of September in order to receive the dividend, which the company will pay on the 1st of October.
Huntington Bancshares’s upcoming dividend is US$0.15 a share, following on from the last 12 months, when the company distributed a total of US$0.60 per share to shareholders. Last year’s total dividend payments show that Huntington Bancshares has a trailing yield of 6.3% on the current share price of $9.58. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s not encouraging to see that Huntington Bancshares’s earnings are effectively flat over the past five years. We’d take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Huntington Bancshares has delivered an average of 31% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Should investors buy Huntington Bancshares for the upcoming dividend? Huntington Bancshares has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. We’re unconvinced on the company’s merits, and think there might be better opportunities out there.
Curious what other investors think of Huntington Bancshares? See what analysts 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.
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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. 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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