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Nov 13

Should Heartland Group Holdings Limited (NZSE:HGH) Be Part Of Your Dividend Portfolio? – Simply Wall St

Hgh Comments Off on Should Heartland Group Holdings Limited (NZSE:HGH) Be Part Of Your Dividend Portfolio? – Simply Wall St

Today well take a closer look at Heartland Group Holdings Limited (NZSE:HGH) from a dividend investors perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on your dividends, its important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope youll find our analysis useful.

With a eight-year payment history and a 5.2% yield, many investors probably find Heartland Group Holdings intriguing. It sure looks interesting on these metrics but theres always more to the story. There are a few simple ways to reduce the risks of buying Heartland Group Holdings for its dividend, and well go through these below.

Explore this interactive chart for our latest analysis on Heartland Group Holdings!

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a companys net income after tax. Heartland Group Holdings paid out 56% of its profit as dividends, over the trailing twelve month period. A payout ratio above 50% generally implies a business is reaching maturity, although it is still possible to reinvest in the business or increase the dividend over time.

Consider getting our latest analysis on Heartland Group Holdings financial position here.

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the last decade of data, we can see that Heartland Group Holdings paid its first dividend at least eight years ago. Its good to see that Heartland Group Holdings has been paying a dividend for a number of years. However, the dividend has been cut at least once in the past, and were concerned that what has been cut once, could be cut again. During the past eight-year period, the first annual payment was NZ$0.04 in 2012, compared to NZ$0.07 last year. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The growth in dividends has not been linear, but the CAGR is a decent approximation of the rate of change over this time frame.

Its good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Heartland Group Holdings might have put its house in order since then, but we remain cautious.

With a relatively unstable dividend, its even more important to see if earnings per share (EPS) are growing. Why take the risk of a dividend getting cut, unless theres a good chance of bigger dividends in future? Heartland Group Holdings has grown its earnings per share at 3.9% per annum over the past five years. 3.9% per annum is not a particularly high rate of growth, which we find curious. When a business is not growing, it often makes more sense to pay higher dividends to shareholders rather than retain the cash with no way to utilise it.

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. First, we think Heartland Group Holdings has an acceptable payout ratio. Second, earnings growth has been ordinary, and its history of dividend payments is chequered having cut its dividend at least once in the past. While were not hugely bearish on it, overall we think there are potentially better dividend stocks than Heartland Group Holdings out there.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, weve picked out 1 warning sign for Heartland Group Holdings that investors should know about before committing capital to this stock.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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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. *Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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Should Heartland Group Holdings Limited (NZSE:HGH) Be Part Of Your Dividend Portfolio? - Simply Wall St

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