Dividend Investors: Don't Be Too Quick To Buy Hurco Companies, Inc. (NASDAQ:HURC) For Its Upcoming Dividend

It looks like Hurco Companies, Inc. (NASDAQ:HURC) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 5th of January will not receive this dividend, which will be paid on the 20th of January.

Hurco Companies's upcoming dividend is US$0.13 a share, following on from the last 12 months, when the company distributed a total of US$0.52 per share to shareholders. Looking at the last 12 months of distributions, Hurco Companies has a trailing yield of approximately 1.7% on its current stock price of $30. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hurco Companies can afford its dividend, and if the dividend could grow.

View our latest analysis for Hurco Companies

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. Hurco Companies paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable.

Click here to see how much of its profit Hurco Companies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Hurco Companies reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hurco Companies has delivered an average of 13% per year annual increase in its dividend, based on the past eight years of dividend payments.

Get our latest analysis on Hurco Companies's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Hurco Companies? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." Bottom line: Hurco Companies has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering Hurco Companies as an investment, you'll find it beneficial to know what risks this stock is facing. For instance, we've identified 2 warning signs for Hurco Companies (1 is potentially serious) you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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