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 of US$0.25 per share on the 1st of September. The dividend yield will be 2.0% based on this payment which is still above the industry average.

See our latest analysis for Helmerich & Payne

Helmerich & Payne's Distributions May Be Difficult To Sustain

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Helmerich & Payne is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Recent, EPS has fallen by 44.3%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

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$0.28 to US$1.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Helmerich & Payne's EPS has fallen by approximately 44% 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.

Helmerich & Payne's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Helmerich & Payne (of which 1 doesn't sit too well with us!) you should know about. 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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