Hill & Smith (LON:HILS) Will Pay A Dividend Of £0.18

Hill & Smith PLC's (LON:HILS) investors are due to receive a payment of £0.18 per share on 7th of January. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

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Hill & Smith's Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. The last dividend was quite easily covered by Hill & Smith's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 39.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

View our latest analysis for Hill & Smith

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from £0.164 total annually to £0.49. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Hill & Smith has been growing its earnings per share at 17% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Hill & Smith Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Hill & Smith that investors should know about before committing capital to this stock. Is Hill & Smith not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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