Last update on 2024-06-28

Hilton Worldwide Holdings (HLT) - Dividend Analysis (Final Score: 4/8)

Explore Hilton Worldwide Holdings' dividend performance. See how HLT scored 4/8 in our thorough 8-criteria dividend policy analysis.

Short Analysis - Dividend Score: 4

We're running Hilton Worldwide Holdings (HLT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Hilton Worldwide Holdings (HLT) gets mixed grades in the 8-criteria dividend scoring system, scoring 4 out of 8. Key points include a below-average dividend yield at 0.3295% compared to the industry's 0.78%. The average annual dividend growth rate is negative at -2.07%, showing inconsistency. A positive note is the very low payout ratio of 7.67%, indicating financial prudence. However, inconsistent EPS and DPS coverage ratios show volatility in dividend sustainability. Dividend coverage by cash flow is also unstable. The company has a short history of dividend payments, only since 2015, and lacks stability over 20 years. Some reliability is shown in stock repurchases since 2011.

Insights for Value Investors Seeking Stable Income

HLT demonstrates mixed results on dividend stability and growth criteria, hence it may not be ideal for dividend-focused investors. Consider it if you value stock buybacks and financial prudence, though the inconsistency in dividend payouts and recent history are red flags for those seeking stable, long-term dividend income.

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 is a critical measure that shows how much a company pays out in dividends each year relative to its stock price.

While Hilton's dividend yield of 0.3295% for 2023 is below the industry average of 0.78%, this does not automatically indicate a negative trend. Historical data reveals fluctuating dividend yields, with peaks above the industry average in years like 2016 and 2018. The lower yield in recent years might suggest a cautious or strategic approach in dividend payments, likely due to external economic factors, such as the COVID-19 pandemic, which led to zero dividend yields in 2020. Moreover, Hilton's rising stock price—reaching $182.09 in 2023—might restrict higher yields. Therefore, while currently lower, the yield shouldn't be viewed in isolation but together with broader market and company-specific contexts, including the stock price performance and payout strategy.

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

The average dividend growth rate is calculated to assess how much dividends have increased over a specific period. An average growth rate above 5% over the last 20 years signifies robust growth.

From the provided data, it's evident that Hilton Worldwide Holdings (HLT) has experienced volatile dividend growth, with some years showing significant payouts ('17: 100.007, '18: 4.4208, '23: 33.3333) and other years reflecting no dividends at all ('03-'16, '14, '19). The negative average growth rate of -2.07% is also worrisome as it suggests a decreasing trend overall. This indicates irregularity and inconsistency in dividend payments, making it a poor indicator for stable dividend growth. Therefore, it's clear that Hilton has not met the criterion of maintaining a dividend growth rate higher than 5% over the last 20 years.

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

The average payout ratio is a dividend metric that shows what percentage of earnings a company is paying out as dividends to shareholders. Keeping this ratio under 65% is crucial as it indicates a company retains sufficient earnings for growth and stability.

For Hilton Worldwide Holdings (HLT), the average payout ratio over the last 20 years is approximately 7.67%, which is significantly below the 65% threshold. This exceedingly low payout ratio suggests that Hilton has been highly conservative in distributing its earnings as dividends. In certain years, such as 2016 (54.49%) and 2018 (23.95%), the payout ratio was notably higher, yet still well within the target range. Other years show very minimal or zero payout, particularly from 2003 to 2014 and 2020, which seems to coincide with years of reinvestment or financial prudence. The negative payout ratio in 2020 and the zero ratios in several years also highlight that the company might have either faced losses or prioritized retaining funds over distributing dividends. Overall, this trend indicates a very cautious dividend policy, reflecting strong financial health focused on sustained growth rather than short-term dividend payouts.

Dividends Well Covered by Earnings?

Dividends being covered by earnings indicates that the company is generating enough profit to meet its dividend obligations. Healthy coverage ratios generally signify financial stability and sustainability of dividend payments.

Hilton Worldwide Holdings (HLT) shows a fluctuating trend in terms of earnings per share (EPS) and dividend per share (DPS) coverage. From 2010 to 2023, the coverage ratio varies greatly, from as low as 0.0 to 0.54495 in 2016. Particularly during the crisis in 2020, the coverage ratio dipped to -0.0581, indicating that earnings were not sufficient to cover dividends. Despite recovering post-2020, the coverage ratio's peak at around 0.13777 in 2023 suggests marginal improvements but still implies volatility. This erratic trend is not ideal, as consistency in coverage would more reliably protect and sustain dividend payments.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refer to the ratio of free cash flow to dividend payout. A ratio above 1 indicates that the cash flow is more than sufficient to cover the dividends, suggesting sustainability and safety.

Examining Hilton Worldwide Holdings (HLT), we see a fluctuating trend in the coverage ratio from 2010 to 2023. For example, in 2010, the coverage ratio was 0.143, suggesting insufficient cash flow to cover dividends. However, in 2021, there was a spike to 4.1, indicating an exceptionally safe dividend. Recently, in 2023, the ratio is at 0.093, once again suggesting potential concerns. Despite the spikes, the majority of years have coverage ratios below 1, hinting at sustainability issues in covering dividends. This inconsistent trend is concerning for potential investors focusing on dividend stability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over 20 years ensures income predictability and reliability for investors. It's critical for those who rely on dividend income for regular cash flows.

Reviewing the data, Hilton Worldwide Holdings (HLT) has inconsistent dividend payouts in the past 20 years. Notably, there were several years with no dividends and drops, especially a significant no-dividend period from 2003-2015, except 2016 onwards. This inconsistency is bad as it fails the stability criterion, making it less reliable for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years? and why it is important to consider

Hilton Worldwide Holdings (HLT) has only started paying dividends since 2015, meaning it has not been paying dividends for over 25 years. This is an important criterion to consider because a long history of consistent dividend payments indicates financial stability and long-term profitability. A company that has paid dividends for more than 25 years typically has a proven track record of rewarding its shareholders, which can be less risky investment for income-oriented investors.

Reliable Stock Repurchases Over the Past 20 Years?

Assessment of reliable stock repurchases over the past 20 years and its importance.

The provided data and repurchase trends indicate that Hilton Worldwide Holdings has shown some consistency in buying back shares over the past 20 years, particularly since 2011. The number of shares steadily decreased since 2011, but it shows a commitment to delivering value to its shareholders. This trend is generally positive, signifying financial robustness and confidence in future growth by improving return metrics like EPS. The average repurchase rate being negative suggests more years with reducing shares, enhancing the per-share value.