Helmerich & Payne (NYSE:HP) Is Due To Pay A Dividend Of $0.25

Helmerich & Payne, Inc. (NYSE:HP) has announced that it will pay a dividend of $0.25 per share on the 1st of December. This means the dividend yield will be fairly typical at 2.2%.

View our latest analysis for Helmerich & Payne

Helmerich & Payne's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Even though Helmerich & Payne is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 9.5%, which we would be comfortable to see continuing.

Helmerich & Payne Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.28 in 2012, and the most recent fiscal year payment was $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Helmerich & Payne's EPS has fallen by approximately 46% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Helmerich & Payne that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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