Read This Before Considering Hillenbrand, Inc. (NYSE:HI) For Its Upcoming US$0.21 Dividend

Hillenbrand, Inc. (NYSE:HI) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 16th of March, you won't be eligible to receive this dividend, when it is paid on the 31st of March.

Hillenbrand's next dividend payment will be US$0.21 per share, on the back of last year when the company paid a total of US$0.85 to shareholders. Calculating the last year's worth of payments shows that Hillenbrand has a trailing yield of 3.9% on the current share price of $21.53. If you buy this business for its dividend, you should have an idea of whether Hillenbrand's dividend is reliable and sustainable. So we need to investigate whether Hillenbrand can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hillenbrand

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. Hillenbrand is paying out an acceptable 60% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Hillenbrand's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Hillenbrand's earnings per share have been shrinking at 4.2% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hillenbrand has delivered 1.4% dividend growth per year on average over the past ten years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Hillenbrand? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. All things considered, we are not particularly enthused about Hillenbrand from a dividend perspective.

However if you're still interested in Hillenbrand as a potential investment, you should definitely consider some of the risks involved with Hillenbrand. For example, Hillenbrand has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.