Hilton Food Group (LON:HFG) Is Increasing Its Dividend To £0.249

Hilton Food Group plc (LON:HFG) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to £0.249. This makes the dividend yield 3.8%, which is above the industry average.

Our free stock report includes 2 warning signs investors should be aware of before investing in Hilton Food Group. Read for free now.

Hilton Food Group's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Hilton Food Group's dividend made up quite a large proportion of earnings but only 63% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 47.8% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 58% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Hilton Food Group

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £0.133 in 2015 to the most recent total annual payment of £0.345. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Hilton Food Group's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Hilton Food Group's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Hilton Food Group's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Hilton Food Group you should be aware of, and 1 of them can't be ignored. Is Hilton Food Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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