Stock Analysis

HNI's (NYSE:HNI) Shareholders Will Receive A Bigger Dividend Than Last Year

Source: Shutterstock

HNI Corporation (NYSE:HNI) will increase its dividend on the 8th of June to US$0.32, which is 3.2% higher than last year. This takes the dividend yield from 3.4% to 3.4%, which shareholders will be pleased with.

Check out our latest analysis for HNI

HNI's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, HNI was paying out quite a large proportion of both earnings and cash flow, with the dividend being 209% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next year is set to see EPS grow by 104.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 45% which would be quite comfortable going to take the dividend forward.

NYSE:HNI Historic Dividend May 20th 2022

HNI Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from US$0.92 in 2012 to the most recent annual payment of US$1.24. This means that it has been growing its distributions at 3.0% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. In the last five years, HNI's earnings per share has shrunk at approximately 4.7% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think HNI will make a great income stock. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for HNI (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Valuation is complex, but we're helping make it simple.

Find out whether HNI is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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

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.