Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Haverty Furniture Companies, Inc. (NYSE:HVT) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 20th of November in order to be eligible for this dividend, which will be paid on the 9th of December.
The upcoming dividend for Haverty Furniture Companies is US$2.22 per share, increased from last year's total dividends per share of US$0.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Haverty Furniture Companies paid out a comfortable 36% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 15% of its free cash flow in the last year.
It's positive to see that Haverty Furniture Companies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Haverty Furniture Companies has grown its earnings rapidly, up 41% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Haverty Furniture Companies has delivered 24% dividend growth per year on average over the past eight years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
From a dividend perspective, should investors buy or avoid Haverty Furniture Companies? Haverty Furniture Companies has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. Haverty Furniture Companies looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Haverty Furniture Companies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 5 warning signs for Haverty Furniture Companies (1 is concerning) you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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