It looks like Haverty Furniture Companies, Inc. (NYSE:HVT) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Haverty Furniture Companies investors that purchase the stock on or after the 19th of November will not receive the dividend, which will be paid on the 8th of December.
The upcoming dividend for Haverty Furniture Companies is US$2.25 per share, increased from last year's total dividends per share of US$1.00. If you buy this business for its dividend, you should have an idea of whether Haverty Furniture Companies's dividend is reliable and sustainable. So we need to investigate whether Haverty Furniture Companies can afford its dividend, and if the dividend could grow.
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. Haverty Furniture Companies has a low and conservative payout ratio of just 19% of its income after tax. 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 19% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Haverty Furniture Companies has grown its earnings rapidly, up 33% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Haverty Furniture Companies looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Haverty Furniture Companies has delivered 23% dividend growth per year on average over the past nine 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? It's great that Haverty Furniture Companies is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Haverty Furniture Companies for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Haverty Furniture Companies (1 can't be ignored!) that deserve your attention before investing in the shares.
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.
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.
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