Hershey (NYSE:HSY) Is Paying Out A Dividend Of $1.37

The board of The Hershey Company (NYSE:HSY) has announced that it will pay a dividend of $1.37 per share on the 16th of June. This means the dividend yield will be fairly typical at 3.4%.

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Hershey's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Hershey's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 3.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 71% by next year, which is in a pretty sustainable range.

View our latest analysis for Hershey

Hershey Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was $2.14, compared to the most recent full-year payment of $5.48. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% 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.

We Could See Hershey's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Hershey has seen EPS rising for the last five years, at 8.8% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Hershey's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Hershey that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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