Hamilton Beach Brands Holding (NYSE:HBB) Has Announced A Dividend Of $0.11

Hamilton Beach Brands Holding Company (NYSE:HBB) will pay a dividend of $0.11 on the 15th of September. The dividend yield will be 4.0% based on this payment which is still above the industry average.

See our latest analysis for Hamilton Beach Brands Holding

Hamilton Beach Brands Holding's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Hamilton Beach Brands Holding was paying out 71% of earnings, but a comparatively small 8.1% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 13.5% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 93% in the next 12 months which is on the higher end of the range we would say is sustainable.

Hamilton Beach Brands Holding Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the annual payment back then was $0.34, compared to the most recent full-year payment of $0.44. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Hamilton Beach Brands Holding's earnings per share has shrunk at 13% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Hamilton Beach Brands Holding's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hamilton Beach Brands Holding's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Hamilton Beach Brands Holding that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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