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The board of Hamilton Beach Brands Holding Company (NYSE:HBB) has announced that it will pay a dividend on the 15th of September, with investors receiving $0.105 per share. The dividend yield will be 3.4% based on this payment which is still above the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Hamilton Beach Brands Holding's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Hamilton Beach Brands Holding
Hamilton Beach Brands Holding's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Hamilton Beach Brands Holding is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS could expand by 5.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.
Hamilton Beach Brands Holding Is Still Building Its Track Record
Hamilton Beach Brands Holding's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was $0.34 in 2017, and the most recent fiscal year payment was $0.42. This means that it has been growing its distributions at 4.3% per annum over that time. 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.
We Could See Hamilton Beach Brands Holding's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Hamilton Beach Brands Holding has impressed us by growing EPS at 5.9% per year over the past three years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Hamilton Beach Brands Holding is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.