Hilton Food Group plc (LON:HFG) recently declared an increase in its dividend from last year, raising it to £0.249 per share. This translates to a dividend yield of 4.1%, a welcome move for investors who value regular income from their investments.
However, it’s essential to think about whether this dividend is sustainable. Prior to this announcement, Hilton was paying out 79% of its earnings, but a lower 63% of its free cash flow. This suggests that there’s still sufficient cash flowing into the company to reinvest in growth opportunities.
Looking ahead, analysts predict a significant boost in earnings per share (EPS), with estimates showing a potential rise of 50.3% over the next year. If this growth occurs, the dividend payout ratio could drop to 57%, which would be a more manageable figure for the company.
Despite the promise of growth, Hilton Food Group’s history with dividends reveals some bumps along the way. Since 2015, dividends have grown from £0.133 to £0.345 annually, averaging a 10% yearly increase. Yet, there have been cuts in the past that raise questions about the stability of future payments.
Over the last five years, Hilton’s EPS has remained relatively flat. This stagnation, combined with a high payout ratio, creates caution. It may indicate that Hilton has reached its limit regarding how much it can return to shareholders. While increasing dividends are nice to see, they don’t guarantee consistent growth.
In the current market, maintaining a steady dividend policy is crucial for attracting and retaining investor confidence. Investors are often more secure with companies that show reliability in their dividend payments. Recent trends suggest a broader shift toward stable dividend-paying stocks as essential holding strategies, especially as inflation impacts overall market performance.
In summary, while Hilton Food Group’s dividend hike is encouraging for shareholders in the short term, the company’s dividend history and current earnings trajectory make future reliability uncertain. Investors should keep an eye on long-term trends rather than short-term gains, especially in a fluctuating economic landscape.
For more detailed analysis of Hilton Food Group, you can check out Simply Wall St.
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Source linkearnings per share, dividend policy
