HNI (NYSE:HNI) Has Announced A Dividend Of US$0.31

By
Simply Wall St
Published
November 16, 2021
NYSE:HNI
Source: Shutterstock

HNI Corporation (NYSE:HNI) has announced that it will pay a dividend of US$0.31 per share on the 1st of December. Based on this payment, the dividend yield on the company's stock will be 3.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for HNI

HNI's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, HNI was paying out 72% of earnings, but a comparatively small 53% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 41.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:HNI Historic Dividend November 17th 2021

HNI 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 first annual payment during the last 10 years was US$0.92 in 2011, and the most recent fiscal year payment was US$1.24. This implies that the company grew its distributions at a yearly rate of about 3.0% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. In the last five years, HNI's earnings per share has shrunk at approximately 6.7% per annum. 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. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On HNI's Dividend

Overall, we think HNI is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 3 analysts are forecasting a turnaround in our free collection of analyst estimates here. We have also put together a list of global stocks with a solid dividend.

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