Hudaco Industries' (JSE:HDC) Dividend Will Be Increased To ZAR3.25

Hudaco Industries Limited (JSE:HDC) will increase its dividend on the 14th of August to ZAR3.25, which is 8.3% higher than last year's payment from the same period of ZAR3.00. This makes the dividend yield about the same as the industry average at 5.9%.

See our latest analysis for Hudaco Industries

Hudaco Industries' Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by Hudaco Industries' earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 10.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ZAR4.65 in 2013 to the most recent total annual payment of ZAR9.25. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Hudaco Industries has grown earnings per share at 10% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Hudaco Industries Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Hudaco Industries that you should be aware of before investing. Is Hudaco Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.