Hargreaves Services (LON:HSP) Has Announced That It Will Be Increasing Its Dividend To £0.18

The board of Hargreaves Services Plc (LON:HSP) has announced that it will be increasing its dividend by 2.3% on the 30th of October to £0.18, up from last year's comparable payment of £0.176. Although the dividend is now higher, the yield is only 4.5%, which is below the industry average.

View our latest analysis for Hargreaves Services

Hargreaves Services' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Hargreaves Services was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 86.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

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. Since 2013, the dividend has gone from £0.178 total annually to £0.21. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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. Hargreaves Services has seen EPS rising for the last five years, at 86% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Hargreaves Services' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Hargreaves Services that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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