Huntington Ingalls Industries' (NYSE:HII) Shareholders Will Receive A Bigger Dividend Than Last Year

Huntington Ingalls Industries, Inc. (NYSE:HII) has announced that it will be increasing its periodic dividend on the 8th of December to $1.30, which will be 4.8% higher than last year's comparable payment amount of $1.24. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.

View our latest analysis for Huntington Ingalls Industries

Huntington Ingalls Industries' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Huntington Ingalls Industries was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 58.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Huntington Ingalls Industries Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.40 in 2013 to the most recent total annual payment of $4.96. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Huntington Ingalls Industries' earnings per share has fallen at approximately 3.0% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Huntington Ingalls Industries that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.