Hooker Furnishings' (NASDAQ:HOFT) Dividend Is Being Reduced To $0.115

The board of Hooker Furnishings Corporation (NASDAQ:HOFT) has announced it will be reducing its dividend by 50% from last year's payment of $0.23 on the 31st of December, with shareholders receiving $0.115. However, the dividend yield of 8.6% is still a decent boost to shareholder returns.

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Hooker Furnishings' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Hooker Furnishings' Could Struggle to Maintain Dividend Payments In The Future

Hooker Furnishings' Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS is forecast to expand by 124.8%. If the dividend continues on its recent course, the payout ratio in 12 months could be 184%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Hooker Furnishings

Hooker Furnishings 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 2015 to the most recent total annual payment of $0.92. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Hooker Furnishings' earnings per share has shrunk at 47% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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 becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payout levels might be a bit high for our liking, but we can't deny that until now, the payments have been pretty consistent. We don't think Hooker Furnishings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Hooker Furnishings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.