Is It Worth Considering Hamilton Beach Brands Holding Company (NYSE:HBB) For Its Upcoming Dividend?

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 Hamilton Beach Brands Holding Company (NYSE:HBB) is about to go ex-dividend in just three 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. 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. Therefore, if you purchase Hamilton Beach Brands Holding's shares on or after the 1st of September, you won't be eligible to receive the dividend, when it is paid on the 15th of September.

The company's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.44 per share. Based on the last year's worth of payments, Hamilton Beach Brands Holding has a trailing yield of 4.0% on the current stock price of $10.9. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hamilton Beach Brands Holding can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hamilton Beach Brands Holding

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hamilton Beach Brands Holding paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. 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. It paid out 7.8% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Hamilton Beach Brands Holding'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 how much of its profit Hamilton Beach Brands Holding paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Hamilton Beach Brands Holding's 15% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hamilton Beach Brands Holding has delivered 4.4% dividend growth per year on average over the past six years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Is Hamilton Beach Brands Holding worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, it's hard to get excited about Hamilton Beach Brands Holding from a dividend perspective.

So if you want to do more digging on Hamilton Beach Brands Holding, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 3 warning signs for Hamilton Beach Brands Holding that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.