HCI Group, Inc. (NYSE:HCI) Will Pay A US$0.40 Dividend In Four Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that HCI Group, Inc. (NYSE:HCI) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 19th of November will not receive this dividend, which will be paid on the 18th of December.

HCI Group's upcoming dividend is US$0.40 a share, following on from the last 12 months, when the company distributed a total of US$1.60 per share to shareholders. Based on the last year's worth of payments, HCI Group has a trailing yield of 3.1% on the current stock price of $51.78. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether HCI Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for HCI Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see HCI Group paying out a modest 40% of its earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by HCI Group's 7.3% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, HCI Group has lifted its dividend by approximately 15% a year on average.

The Bottom Line

Has HCI Group got what it takes to maintain its dividend payments? HCI Group's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

If you're not too concerned about HCI Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 3 warning signs for HCI Group that we strongly recommend you have a look at before investing in the company.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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