H&E Equipment Services (NASDAQ:HEES) Is Due To Pay A Dividend Of $0.275

The board of H&E Equipment Services, Inc. (NASDAQ:HEES) has announced that it will pay a dividend of $0.275 per share on the 9th of June. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

See our latest analysis for H&E Equipment Services

H&E Equipment Services' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, H&E Equipment Services' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 35.3%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

H&E Equipment Services Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the dividend has gone from $1.00 total annually to $1.10. This means that it has been growing its distributions at 1.1% per annum over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

H&E Equipment Services May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, H&E Equipment Services has only grown its earnings per share at 4.5% per annum over the past five years. While EPS growth is quite low, H&E Equipment Services has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On H&E Equipment Services' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While H&E Equipment Services is earning enough to cover the payments, the cash flows are lacking. We don't think H&E Equipment Services is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for H&E Equipment Services 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.