Huntington Ingalls Industries (NYSE:HII) Has Announced That It Will Be Increasing Its Dividend To $1.38

Huntington Ingalls Industries, Inc. (NYSE:HII) has announced that it will be increasing its periodic dividend on the 12th of December to $1.38, which will be 2.2% higher than last year's comparable payment amount of $1.35. This takes the annual payment to 1.8% of the current stock price, which is about average for the industry.

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Huntington Ingalls Industries' Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Huntington Ingalls Industries was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 46.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Huntington Ingalls Industries

Huntington Ingalls Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $1.60 total annually to $5.40. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Huntington Ingalls Industries May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that Huntington Ingalls Industries' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Huntington Ingalls Industries is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We Really Like Huntington Ingalls Industries' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Huntington Ingalls Industries that investors need to be conscious of moving forward. Is Huntington Ingalls Industries 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.