In a move that may intrigue investors, HNI Corporation (NYSE:HNI) has declared a dividend yield of 3.4%, translating to a $0.32 per share payment scheduled for December 1st. This rate stands above the industry average, signaling a potentially attractive return for shareholders. Despite a backdrop where previous earnings did not cover the last dividend, HNI has managed to ensure adequate cash flow to support this payout.
Looking forward, the company projects a significant uptick in earnings per share in the coming year, which could result in a payout ratio of 46%. This optimistic outlook comes after a period of consistent growth in annual dividends, averaging an increase of 2.9% since 2013, elevating the total annual dividends from $0.96 to $1.28.
However, it's important for investors to note some concerns regarding the sustainability of these dividends. Over the past five years, HNI has seen its earnings per share decline annually by 16%, raising questions about long-term dividend maintenance. To support its dividend payments, HNI has recently expanded its share count by 13%, a decision that might not align with traditional dividend strategies.
While HNI's cash generation appears strong, sustaining the current dividend levels could prove challenging without consistent earnings growth. Investors are advised to weigh these factors and any associated warning signs when considering HNI's stock performance in their investment decisions.
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