Hess (NYSE:HES) Will Pay A Dividend Of US$0.25

By
Simply Wall St
Published
September 05, 2021
NYSE:HES
Source: Shutterstock

Hess Corporation (NYSE:HES) has announced that it will pay a dividend of US$0.25 per share on the 30th of September. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.

See our latest analysis for Hess

Hess Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. While Hess is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS could expand by 30.3% if recent trends continue. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

historic-dividend
NYSE:HES Historic Dividend September 6th 2021

Hess Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.40, compared to the most recent full-year payment of US$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Hess has grown earnings per share at 30% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for Hess that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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