Yahoo Finance Hammond Power Solutions (TSE:HPS.A) Will Pay A Dividend Of CA$0.085
The board of Hammond Power Solutions Inc. (TSE:HPS.A) has announced that it will pay a dividend on the 24th of March, with investors receiving CA$0.085 per share. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.
See our latest analysis for Hammond Power Solutions
Hammond Power Solutions' Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Hammond Power Solutions' dividend was only 27% of earnings, however it was paying out 219% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Looking forward, earnings per share is forecast to rise by 6.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.
Hammond Power Solutions Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from CA$0.15 to CA$0.34. This implies that the company grew its distributions at a yearly rate of about 8.5% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Hammond Power Solutions has seen EPS rising for the last five years, at 26% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hammond Power Solutions' payments, as there could be some issues with sustaining them into the future. While Hammond Power Solutions is earning enough to cover the payments, the cash flows are lacking. We don't think Hammond Power Solutions is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Hammond Power Solutions that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
