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

H&E Equipment Services, Inc.'s (NASDAQ:HEES) investors are due to receive a payment of $0.275 per share on 13th of September. The dividend yield will be 2.4% based on this payment which is still above the industry average.

See our latest analysis for H&E Equipment Services

H&E Equipment Services' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, H&E Equipment Services was paying only paying out a fraction of earnings, but the payment was a massive 136% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 7.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 27%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

H&E Equipment Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $1.00, compared to the most recent full-year payment of $1.10. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that H&E Equipment Services has been growing its earnings per share at 14% a year over the past five years. H&E Equipment Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On H&E Equipment Services' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think H&E Equipment Services 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for H&E Equipment Services (of which 1 is significant!) you should know about. Is H&E Equipment Services 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.