Hostelworld Group plc (LON:HSW) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
It looks like Hostelworld Group plc (LON:HSW) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Hostelworld Group's shares before the 27th of August in order to be eligible for the dividend, which will be paid on the 18th of September.
The company's next dividend payment will be €0.0083 per share, and in the last 12 months, the company paid a total of €0.024 per share. Calculating the last year's worth of payments shows that Hostelworld Group has a trailing yield of 1.8% on the current share price of UK£1.145. If you buy this business for its dividend, you should have an idea of whether Hostelworld Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Hostelworld Group paying out a modest 46% of its earnings. A useful secondary check can be to evaluate whether Hostelworld Group generated enough free cash flow to afford its dividend. Luckily it paid out just 22% of its free cash flow last year.
It's positive to see that Hostelworld Group'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.
View our latest analysis for Hostelworld Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Hostelworld Group has grown its earnings rapidly, up 70% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hostelworld Group's dividend payments per share have declined at 1.2% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
From a dividend perspective, should investors buy or avoid Hostelworld Group? Hostelworld Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Hostelworld Group, and we would prioritise taking a closer look at it.
Wondering what the future holds for Hostelworld Group? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.