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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that HNI Corporation (NYSE:HNI) is about to go ex-dividend in just two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. In other words, investors can purchase HNI's shares before the 24th of February in order to be eligible for the dividend, which will be paid on the 5th of March.
The company's upcoming dividend is US$0.33 a share, following on from the last 12 months, when the company distributed a total of US$1.32 per share to shareholders. Looking at the last 12 months of distributions, HNI has a trailing yield of approximately 2.7% on its current stock price of US$49.15. If you buy this business for its dividend, you should have an idea of whether HNI's dividend is reliable and sustainable. As a result, readers should always check whether HNI has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for HNI
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see HNI paying out a modest 49% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 37% of its free cash flow as dividends, a comfortable payout level 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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at HNI, with earnings per share up 2.6% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.