Should Income Investors Look At Hallenstein Glasson Holdings Limited (NZSE:HLG) Before Its Ex-Dividend?

It looks like Hallenstein Glasson Holdings Limited (NZSE:HLG) is about to go ex-dividend in the next 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Hallenstein Glasson Holdings' shares on or after the 7th of December, you won't be eligible to receive the dividend, when it is paid on the 15th of December.

The company's next dividend payment will be NZ$0.27 per share, on the back of last year when the company paid a total of NZ$0.48 to shareholders. Calculating the last year's worth of payments shows that Hallenstein Glasson Holdings has a trailing yield of 7.9% on the current share price of NZ$6.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Hallenstein Glasson Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 90% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (54%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Hallenstein Glasson Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Hallenstein Glasson Holdings earnings per share are up 3.2% per annum over the last five years. A payout ratio of 90% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Hallenstein Glasson Holdings has increased its dividend at approximately 3.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Should investors buy Hallenstein Glasson Holdings for the upcoming dividend? Earnings per share have been growing modestly and Hallenstein Glasson Holdings paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Hallenstein Glasson Holdings from a dividend perspective.

If you want to look further into Hallenstein Glasson Holdings, it's worth knowing the risks this business faces. To help with this, we've discovered 1 warning sign for Hallenstein Glasson Holdings that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.