Helmerich & Payne (NYSE:HP) Will Pay A Dividend Of US$0.25

The board of Helmerich & Payne, Inc. (NYSE:HP) has announced that it will pay a dividend on the 27th of May, with investors receiving US$0.25 per share. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Helmerich & Payne's stock price has increased by 83% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Helmerich & Payne

Helmerich & Payne Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS is forecast to expand by 74.7%. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Helmerich & Payne Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from US$0.24 to US$1.00. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Helmerich & Payne's earnings per share has shrunk at 43% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Helmerich & Payne's Dividend Doesn't Look Sustainable

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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Helmerich & Payne you should be aware of, and 1 of them doesn't sit too well with us. Is Helmerich & Payne not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.