Stock Analysis

Hamilton Beach Brands Holding's (NYSE:HBB) Dividend Will Be $0.105

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NYSE:HBB
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Hamilton Beach Brands Holding Company (NYSE:HBB) has announced that it will pay a dividend of $0.105 per share on the 15th of December. Based on this payment, the dividend yield on the company's stock will be 3.3%, which is an attractive boost to shareholder returns.

Check out the opportunities and risks within the US Consumer Durables industry.

Hamilton Beach Brands Holding's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Hamilton Beach Brands Holding's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 5.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:HBB Historic Dividend November 22nd 2022

Hamilton Beach Brands Holding Is Still Building Its Track Record

It is great to see that Hamilton Beach Brands Holding has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 5 years was $0.34 in 2017, 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. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

We Could See Hamilton Beach Brands Holding's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Hamilton Beach Brands Holding has seen EPS rising for the last five years, at 5.9% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Hamilton Beach Brands Holding's prospects of growing its dividend payments in the future.

Our Thoughts On Hamilton Beach Brands Holding's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Hamilton Beach Brands Holding is earning enough to cover the payments, the cash flows are lacking. We don't think Hamilton Beach Brands Holding 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. Case in point: We've spotted 3 warning signs for Hamilton Beach Brands Holding (of which 2 are a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

What are the risks and opportunities for Hamilton Beach Brands Holding?

Hamilton Beach Brands Holding Company, together with its subsidiaries, designs, markets, and distributes small electric household and specialty housewares appliances in the United States and internationally.

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Rewards

  • Price-To-Earnings ratio (5.7x) is below the US market (15.5x)

  • Earnings have grown 7.8% per year over the past 5 years

Risks

  • Debt is not well covered by operating cash flow

  • High level of non-cash earnings

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