Heartland Group Holdings (NZSE:HGH) Is Increasing Its Dividend To NZ$0.0706

Heartland Group Holdings Limited's (NZSE:HGH) dividend will be increasing from last year's payment of the same period to NZ$0.0706 on 20th of September. This makes the dividend yield 6.7%, which is above the industry average.

See our latest analysis for Heartland Group Holdings

Heartland Group Holdings' Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Heartland Group Holdings has a long history of paying out a part of its earnings to shareholders. Based on Heartland Group Holdings' last earnings report, the payout ratio is at a decent 82%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is forecast to rise by 45.0% over the next 3 years. Likewise, analysts forecast that the future payout ratio could reach 76% over that same time period. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

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 annual payment back then was NZ$0.04, compared to the most recent full-year payment of NZ$0.12. This works out to be a compound annual growth rate (CAGR) of approximately 12% 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Heartland Group Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Heartland Group Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Heartland Group Holdings' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Heartland Group Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.