Last update on 2024-06-28

Huntington Ingalls Industries (HII) - Dividend Analysis (Final Score: 7/8)

Analyze the performance and stability of Huntington Ingalls Industries' dividend policy, achieving an impressive 7/8 score using an 8-criteria system.

Short Analysis - Dividend Score: 7

We're running Huntington Ingalls Industries (HII) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield refers to a company's annual dividend payments to shareholders expressed as a percentage of the stock's current price. It's a key measure for investors because it indicates the return on investment from dividends alone.

Huntington Ingalls Industries (HII) boasts a current dividend yield of 1.9334%, which is significantly above the industry average of 1.16%. Analyzing historical data, HII's dividend yield has generally increased over the past decade, peaking in 2020 with a yield of 2.4812%. This upward trend suggests that HII has consistently grown its dividend payments relative to its stock price—a positive sign for dividend-focused investors. Compared to the industry, where yields have mostly remained below 2%, HII's commitment to rewarding shareholders stands out. Investors looking for stable and increasing income might find HII's higher than average yield appealing. Furthermore, the increased yield over the stock's appreciating price (from $31.28 in 2011 to $259.64 in 2023) showcases HII's balanced approach to growth and shareholder returns.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend growth rate represents the compounded annual growth rate (CAGR) of dividends per share given by the company over a specified period, in this case, 20 years. A growth rate higher than 5% is generally considered healthy and demonstrates the company's commitment to rewarding its shareholders. Consistent and robust dividend growth can act as a signal of a company's stable earnings and sound financial health.

Based on the provided numbers, although Huntington Ingalls Industries (HII) did not distribute dividends before 2013, the average dividend ratio from 2013 to 2023 is reported to be 42.9852%. This dramatic change looks unusual and calculations should be closely monitored for accuracy as yearly percentage increments hihat alternates and generally trend down, signaling an inconsistent payout approach. For instance, the ratios swung from 400% in 2013 to 5.02% in 2023. However, over recent years, the growth stabilized with lower figures of around 5%. Their approach does show an overall commitment and attempt to grow dividends, but not sustain beyond the >5% growth rate. Therefore, understanding exclusions of anomalies and corrections to the data set is crucial to deduce any long-term trend accuracy. It indicates an initial disproportionate payout trend is reshaping towards sustainability though it is slower-paced presently, performing weaker relative to consistent dividend growers.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio, calculated as dividends divided by net income, signifies the portion of earnings distributed as dividends. A ratio under 65% suggests a healthy balance between rewarding shareholders and retaining profit for growth.

Huntington Ingalls Industries has maintained an average payout ratio of 15.86% over the last 20 years. This is well below the 65% threshold, indicating a conservative approach to dividend payments. Such prudence not only underscores the firm’s ability to sustain its dividends but also highlights ample room for future growth and reinvestment. The payout ratio has remained particularly steady, never exceeding 34%, which augurs well for financial stability and investor confidence. Therefore, this trend is decisively positive for HII regarding dividend sustainability.

Dividends Well Covered by Earnings?

Dividends well covered by earnings ensure that a company can sustainably pay its shareholders without compromising its financial stability. This is important for long-term investors.

Analyzing the historical data from 2008 to 2023, it is evident that Huntington Ingalls Industries (HII) has shown periods of variance in its capacity to cover dividends with its earnings. In the early years, the payout ratio was minimal due to low or negative earnings per share (EPS) and no dividends. For instance, in 2011 EPS was negative at -1.9262 while no dividends were paid. This trend improved gradually as the company stabilized and increased its earnings. By 2016, HII's EPS had significantly strengthened to 12.1398, covering dividends (2.1) amply and reflecting in a comfortable payout ratio of around 0.173. However, it is noticeable that in some subsequent years, the divergent earnings per share amount restrained this capacity somewhat. For example, the payout ratio swelled to 0.158 in 2018 due to a high EPS (19.0868), indicating the company's proactive dividend policy. Overall, from the levels of 0.0343 in 2012 to a decent 0.2941 in 2023, the trend can be seen as generally positive though slightly fluctuating. These payout ratios are, by and large, on the lower side which illustrates a healthy coverage of dividends by earnings, showcasing financial prudence and potential for further steady dividend growth in the long term.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is crucial because it indicates the company's ability to sustain its dividend payments without compromising its financial health.

Over the observed years, the trend in free cash flow has generally been positive, with a notable surge in 2023 reaching $678 million. Correspondingly, dividend payout amounts have been increasing, but at a slower rate compared to the free cash flow. The coverage ratio, which reflects how well the dividends are backed by free cash flow, began at 0 in the early years and peaked in 2011 before stabilizing around 0.3-0.4 in recent years. The upward trend in free cash flow relative to the more modest increase in dividend payouts, especially the recent figures, suggests an improving trend in dividend coverage, a positive indicator for financial stability.

Stable Dividends Since the Company Began Paying Dividends?

Huntington Ingalls Industries (HII)'s stable dividends over 20 years and its significance

Analyzing Huntington Ingalls Industries (HII)’s 20-year dividend data, it’s evident there were no dividends between 2008 and 2010. From 2012 on, dividends per share saw progressive growth, reaching $5.02 in 2023. Importantly, there was no year where the dividend dropped by more than 20%, adhering to stability criterions. Such stability is highly favorable for income-seeking investors who prioritize consistent returns and financial reliability in their portfolios.

Dividends Paid for Over 25 Years?

Whether a company has paid dividends for over 25 years shows its stability and shareholder-friendly policies.

Huntington Ingalls Industries (HII) has a shortened history of paying dividends, starting from 2012. With dividends initiated at $0.10 per share and growing constantly to $5.02 per share in 2023, it shows a commitment to returning capital to shareholders. Nonetheless, having paid dividends for only 11 years, the company falls short of meeting the 25-year criterion. This relatively recent introduction and subsequent growth in dividends may still be seen as favorable, indicating financial growth and health, but more years of consistent payments are needed to classify HII as a long-standing dividend-paying entity.

Reliable Stock Repurchases Over the Past 20 Years?

Analysis of reliable stock repurchases over a long period is crucial to understanding a company's commitment to returning value to its shareholders.

Reviewing the number of shares outstanding for Huntington Ingalls Industries (HII) from 2008 to 2023, the data reveals a clear trend towards reducing the number of shares, thereby repurchasing its stock. Except for minor fluctuations in some years, the strong downward trend in shares outstanding—evident when over the years listed went from 49,000,000 in 2008 to 39,900,000 shares in 2023—demonstrates reliable and ongoing share repurchases. Specifically, the most active repurchase years include 2010, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023. An average repurchase rate of -1.3408% is considerable, reflecting consistent share reduction, a sign of financial well-being and strong commitment to delivering shareholder value.