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Hillenbrand, Inc. (NYSE:HI) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Hillenbrand's shares before the 15th of June in order to receive the dividend, which the company will pay on the 30th of June.
The company's upcoming dividend is US$0.22 a share, following on from the last 12 months, when the company distributed a total of US$0.88 per share to shareholders. Last year's total dividend payments show that Hillenbrand has a trailing yield of 1.7% on the current share price of $52.27. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Hillenbrand has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Hillenbrand
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hillenbrand paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Hillenbrand generated enough free cash flow to afford its dividend. It paid out more than half (74%) of its free cash flow in the past year, which is within an average range for most companies.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Hillenbrand earnings per share are up 8.5% per annum over the last five years. Decent historical earnings per share growth suggests Hillenbrand has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.