Hanesbrands (NYSE:HBI) Has Re-Affirmed Its Dividend Of US$0.15

By
Simply Wall St
Published
May 07, 2022
NYSE:HBI
Source: Shutterstock

Hanesbrands Inc. (NYSE:HBI) has announced that it will pay a dividend of US$0.15 per share on the 31st of May. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Hanesbrands

Hanesbrands' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Hanesbrands' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 12.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:HBI Historic Dividend May 6th 2022

Hanesbrands 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. The first annual payment during the last 9 years was US$0.20 in 2013, and the most recent fiscal year payment was US$0.60. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Hanesbrands' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Hanesbrands' Dividend

Overall, a consistent dividend is a good thing, and we think that Hanesbrands has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Hanesbrands you should be aware of, and 1 of them is a bit unpleasant. 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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