Don't Race Out To Buy Hurco Companies, Inc. (NASDAQ:HURC) Just Because It's Going Ex-Dividend

Readers hoping to buy Hurco Companies, Inc. (NASDAQ:HURC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 26th of March to receive the dividend, which will be paid on the 12th of April.

Hurco Companies's next dividend payment will be US$0.14 per share. Last year, in total, the company distributed US$0.56 to shareholders. Based on the last year's worth of payments, Hurco Companies stock has a trailing yield of around 1.6% on the current share price of $34. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See 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 reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Hurco Companies didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Hurco Companies was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Hurco Companies has increased its dividend at approximately 14% a year on average.

We update our analysis on Hurco Companies every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Should investors buy Hurco Companies for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

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 example, we've found 2 warning signs for Hurco Companies (1 is potentially serious!) that deserve your attention before investing in the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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