Hillenbrand (NYSE:HI) Is Paying Out A Larger Dividend Than Last Year

Hillenbrand, Inc. (NYSE:HI) will increase its dividend on the 29th of December to $0.2225, which is 1.1% higher than last year's payment from the same period of $0.22. This will take the dividend yield to an attractive 2.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Hillenbrand

Hillenbrand's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, Hillenbrand is earning enough to cover the payment, but then it makes up 6,837% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 33.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Hillenbrand Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.78 total annually to $0.88. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.8% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 4.8% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Hillenbrand's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Hillenbrand's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Hillenbrand has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is Hillenbrand not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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