Huntington Bancshares Incorporated (NASDAQ:HBAN) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 17th of March in order to be eligible for this dividend, which will be paid on the 1st of April.
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. Based on the last year’s worth of payments, Huntington Bancshares stock has a trailing yield of around 6.6% on the current share price of $9.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Huntington Bancshares’s payout ratio is modest, at just 45% of profit.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we’re glad to see Huntington Bancshares’s earnings per share have risen 12% per annum over the last five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Huntington Bancshares has increased its dividend at approximately 31% a year on average. 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 Huntington Bancshares an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Huntington Bancshares more closely.
While it’s tempting to invest in Huntington Bancshares for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we’ve identified 1 warning sign with Huntington Bancshares and understanding them should be part of your investment process.
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.
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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