Helmerich & Payne, Inc. (NYSE:HP) Looks Interesting, And It's About To Pay A Dividend

Helmerich & Payne, Inc. (NYSE:HP) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Helmerich & Payne investors that purchase the stock on or after the 18th of November will not receive the dividend, which will be paid on the 2nd of December.

The company's next dividend payment will be US$0.25 per share, and in the last 12 months, the company paid a total of US$1.68 per share. Calculating the last year's worth of payments shows that Helmerich & Payne has a trailing yield of 4.9% on the current share price of US$33.94. If you buy this business for its dividend, you should have an idea of whether Helmerich & Payne's dividend is reliable and sustainable. As a result, readers should always check whether Helmerich & Payne has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Helmerich & Payne

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Helmerich & Payne's payout ratio is modest, at just 29% of profit. 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. Over the last year, it paid out more than three-quarters (89%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Helmerich & Payne's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Helmerich & Payne has grown its earnings rapidly, up 60% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Helmerich & Payne's dividend payments per share have declined at 3.9% per year on average over the past 10 years, which is uninspiring. Helmerich & Payne is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

From a dividend perspective, should investors buy or avoid Helmerich & Payne? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

So while Helmerich & Payne looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 3 warning signs for Helmerich & Payne that we strongly recommend you have a look at before investing in the company.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.