Hingham Institution for Savings' (NASDAQ:HIFS) Dividend Will Be Increased To US$1.30

Hingham Institution for Savings (NASDAQ:HIFS) has announced that it will be increasing its dividend on the 12th of January to US$1.30. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Hingham Institution for Savings

Hingham Institution for Savings' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Hingham Institution for Savings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 24.7% over the next 12 months. If the dividend continues on this path, the payout ratio could be 7.8% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the first annual payment was US$1.21, compared to the most recent full-year payment of US$2.95. This works out to be a compound annual growth rate (CAGR) of approximately 9.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Hingham Institution for Savings has been growing its earnings per share at 25% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Hingham Institution for Savings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Hingham Institution for Savings that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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