Stock Analysis

Harvest Technology (MTSE:HRV) Is Paying Out Less In Dividends Than Last Year

MTSE:HRV
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Harvest Technology p.l.c.'s (MTSE:HRV) dividend is being reduced from last year's payment covering the same period to €0.02 on the 31st of August. However, the dividend yield of 3.5% is still a decent boost to shareholder returns.

View our latest analysis for Harvest Technology

Harvest Technology's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Harvest Technology's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 46.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

historic-dividend
MTSE:HRV Historic Dividend August 18th 2022

Harvest Technology's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 2 years was €0.048 in 2020, and the most recent fiscal year payment was €0.044. Doing the maths, this is a decline of about 4.3% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Harvest Technology has grown earnings per share at 46% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Harvest Technology could prove to be a strong dividend payer.

We Really Like Harvest Technology's Dividend

Overall, we think that Harvest Technology could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Harvest Technology (1 is a bit unpleasant!) that you should be aware of before investing. Is Harvest Technology not quite the opportunity you were looking for? Why not check out 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.