Hyatt Hotels Corporation (NYSE:H) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 25th of November, you won’t be eligible to receive this dividend, when it is paid on the 9th of December.
Hyatt Hotels’s next dividend payment will be US$0.19 per share. Last year, in total, the company distributed US$0.76 to shareholders. Based on the last year’s worth of payments, Hyatt Hotels stock has a trailing yield of around 1.0% on the current share price of $79.48. If you buy this business for its dividend, you should have an idea of whether Hyatt Hotels’s dividend is reliable and sustainable. So we need to investigate whether Hyatt Hotels can afford its dividend, and if the dividend could grow.
See our latest analysis for Hyatt Hotels
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hyatt Hotels has a low and conservative payout ratio of just 16% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 55% of the company’s free cash flow last year, which is within a normal range for most dividend-paying organisations.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That’s why it’s comforting to see Hyatt Hotels’s earnings have been skyrocketing, up 29% per annum for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Hyatt Hotels has delivered an average of 13% per year annual increase in its dividend, based on the past two years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Has Hyatt Hotels got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Hyatt Hotels paid out less than half its earnings and a bit over half its free cash flow. It’s a promising combination that should mark this company worthy of closer attention.
Ever wonder what the future holds for Hyatt Hotels? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.