Hamilton Beach Brands Holding (NYSE:HBB) Will Pay A Larger Dividend Than Last Year At $0.11

Hamilton Beach Brands Holding Company (NYSE:HBB) has announced that it will be increasing its periodic dividend on the 15th of June to $0.11, which will be 4.8% higher than last year's comparable payment amount of $0.105. This takes the dividend yield to 4.0%, which shareholders will be pleased with.

Check out our latest analysis for Hamilton Beach Brands Holding

Hamilton Beach Brands Holding's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Hamilton Beach Brands Holding was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 7.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 54%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Hamilton Beach Brands Holding Doesn't Have A Long Payment History

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. The annual payment during the last 5 years was $0.34 in 2018, and the most recent fiscal year payment was $0.42. This implies that the company grew its distributions at a yearly rate of about 4.3% 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 May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Hamilton Beach Brands Holding's EPS has declined at around 7.3% a year. 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Hamilton Beach Brands Holding will make a great income stock. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Hamilton Beach Brands Holding that investors should take into consideration. 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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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.