Hamilton Beach Brands Holding Company (NYSE:HBB) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Hamilton Beach Brands Holding's shares on or after the 2nd of December, you won't be eligible to receive the dividend, when it is paid on the 13th of December.

The company's next dividend payment will be US$0.115 per share, and in the last 12 months, the company paid a total of US$0.46 per share. Looking at the last 12 months of distributions, Hamilton Beach Brands Holding has a trailing yield of approximately 2.3% on its current stock price of US$19.81. If you buy this business for its dividend, you should have an idea of whether Hamilton Beach Brands Holding's dividend is reliable and sustainable. As a result, readers should always check whether Hamilton Beach Brands Holding has been able to grow its dividends, or if the dividend might be cut.

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 just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out 12% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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 strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Hamilton Beach Brands Holding earnings per share are up 2.7% per annum over the last five years. Hamilton Beach Brands Holding is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, seven years ago, Hamilton Beach Brands Holding has lifted its dividend by approximately 4.4% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Hamilton Beach Brands Holding worth buying for its dividend? Earnings per share growth has been growing somewhat, and Hamilton Beach Brands Holding is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Hamilton Beach Brands Holding is halfway there. It's a promising combination that should mark this company worthy of closer attention.

Keen to explore more data on Hamilton Beach Brands Holding's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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

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