Hays plc (LON:HAS) Pays A UK£0.0095 Dividend In Just Three Days

Readers hoping to buy Hays plc (LON:HAS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Hays' shares before the 29th of February to receive the dividend, which will be paid on the 9th of April.

The company's next dividend payment will be UK£0.0095 per share. Last year, in total, the company distributed UK£0.052 to shareholders. Last year's total dividend payments show that Hays has a trailing yield of 5.5% on the current share price of UK£0.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hays can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hays

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hays paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 35% of its free cash flow in the past year.

It's positive to see that Hays's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Hays's earnings per share have dropped 14% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Hays has lifted its dividend by approximately 7.7% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Has Hays got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall, it's hard to get excited about Hays from a dividend perspective.

So if you want to do more digging on Hays, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 2 warning signs for Hays that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.