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 Helios Technologies, Inc. (NASDAQ:HLIO) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 3rd of October will not receive this dividend, which will be paid on the 20th of October.
Helios Technologies's next dividend payment will be US$0.09 per share, and in the last 12 months, the company paid a total of US$0.4 per share. Based on the last year's worth of payments, Helios Technologies stock has a trailing yield of around 0.9% on the current share price of $40.6. If you buy this business for its dividend, you should have an idea of whether Helios Technologies's dividend is reliable and sustainable. As a result, readers should always check whether Helios Technologies has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Helios Technologies
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. Helios Technologies has a low and conservative payout ratio of just 19% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Helios Technologies'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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Helios Technologies, with earnings per share up 5.9% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.