Heartland Group Holdings (NZSE:HGH) Is Paying Out Less In Dividends Than Last Year

Heartland Group Holdings Limited (NZSE:HGH) has announced that on 20th of September, it will be paying a dividend ofNZ$0.0353, which a reduction from last year's comparable dividend. This means the annual payment is 6.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Heartland Group Holdings

Heartland Group Holdings' Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Heartland Group Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Heartland Group Holdings' payout ratio of 71% is a good sign as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 74.9%. Analysts forecast the future payout ratio could be 53% over the same time horizon, which is a number we think the company can maintain.

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. The annual payment during the last 10 years was NZ$0.05 in 2014, and the most recent fiscal year payment was NZ$0.07. This means that it has been growing its distributions at 3.4% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Heartland Group Holdings has seen earnings per share falling at 9.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

An additional note is that the company has been raising capital by issuing stock equal to 31% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Heartland Group Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. Is Heartland Group Holdings 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.