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The board of Hamilton Beach Brands Holding Company (NYSE:HBB) has announced that the dividend on 13th of June will be increased to $0.12, which will be 4.3% higher than last year's payment of $0.115 which covered the same period. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.
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Hamilton Beach Brands Holding's Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Hamilton Beach Brands Holding's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 18.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Hamilton Beach Brands Holding
Hamilton Beach Brands Holding Doesn't Have A Long Payment History
It is great to see that Hamilton Beach Brands Holding has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was $0.34, compared to the most recent full-year payment of $0.46. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. Hamilton Beach Brands Holding hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Hamilton Beach Brands Holding has been growing its earnings per share at 18% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Hamilton Beach Brands Holding's Dividend
Overall, a dividend increase is always good, and we think that Hamilton Beach Brands Holding is a strong income stock thanks to its track record and growing earnings. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.