Haverty Furniture Companies, Inc. (NYSE:HVT) stock is about to trade ex-dividend in four days. This means that investors who purchase shares on or after the 20th of November will not receive the dividend, which will be paid on the 9th of December.
Haverty Furniture Companies's next dividend payment will be US$2.22 per share, which looks like a nice increase on last year, when the company distributed a total of US$0.80 to shareholders. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That's why it's good to see Haverty Furniture Companies paying out a modest 36% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 15% of its free cash flow in the last year.
It's positive to see that Haverty Furniture Companies'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.
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Haverty Furniture Companies's earnings have been skyrocketing, up 41% per annum for the past five years. Haverty Furniture Companies is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Haverty Furniture Companies has delivered 24% dividend growth per year on average over the past eight years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Haverty Furniture Companies for the upcoming dividend? Haverty Furniture Companies has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. Haverty Furniture Companies looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Haverty Furniture Companies has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Haverty Furniture Companies has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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