High Liner Foods (TSE:HLF) Will Pay A Larger Dividend Than Last Year At $0.175

High Liner Foods Incorporated (TSE:HLF) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of December to $0.175. This makes the dividend yield 4.7%, which is above the industry average.

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High Liner Foods' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. High Liner Foods is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 16.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for High Liner Foods

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.328 in 2015 to the most recent total annual payment of $0.482. This means that it has been growing its distributions at 3.9% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that High Liner Foods has grown earnings per share at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On High Liner Foods' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for High Liner Foods you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.