Hillenbrand (NYSE:HI) Has Announced A Dividend Of $0.22

The board of Hillenbrand, Inc. (NYSE:HI) has announced that it will pay a dividend on the 29th of September, with investors receiving $0.22 per share. This means the dividend yield will be fairly typical at 1.9%.

Check out our latest analysis for Hillenbrand

Hillenbrand's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Hillenbrand was paying a whopping 125% as a dividend, but this only made up 28% of its overall earnings. 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.

Over the next year, EPS is forecast to fall by 21.5%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 36%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Hillenbrand Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.77, compared to the most recent full-year payment of $0.88. This means that it has been growing its distributions at 1.3% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Hillenbrand has grown earnings per share at 23% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Hillenbrand has 4 warning signs (and 2 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.