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Huntington Ingalls Industries, Inc. (NYSE:HII) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Huntington Ingalls Industries' shares on or after the 27th of May will not receive the dividend, which will be paid on the 11th of June.
The company's upcoming dividend is US$1.14 a share, following on from the last 12 months, when the company distributed a total of US$4.56 per share to shareholders. Last year's total dividend payments show that Huntington Ingalls Industries has a trailing yield of 2.1% on the current share price of $213.67. If you buy this business for its dividend, you should have an idea of whether Huntington Ingalls Industries's dividend is reliable and sustainable. So we need to investigate whether Huntington Ingalls Industries can afford its dividend, and if the dividend could grow.
View our latest analysis for Huntington Ingalls Industries
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Huntington Ingalls Industries's payout ratio is modest, at just 26% of profit. 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. The good news is it paid out just 24% of its free cash flow in the last year.
It's positive to see that Huntington Ingalls Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Huntington Ingalls Industries's earnings per share have risen 15% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.