Last update on 2024-06-27

Hancock Whitney (HWC) - Dividend Analysis (Final Score: 6/8)

Explore Hancock Whitney (HWC) dividend with an 8-criteria score system. Get insights on sustainability and performance for better investment decisions.

Short Analysis - Dividend Score: 6

We're running Hancock Whitney (HWC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Hancock Whitney (HWC) scored a 6 out of 8 in a dividend policy analysis, which examines eight criteria affecting the performance and stability of its dividend payments. Despite posting a dividend yield of 2.4696% in 2023, which is below the industry average of 2.76%, HWC has shown consistent dividends per share in the range of $1.08 to $1.2 over the last decade. The company has a mixed dividend growth rate average of 5.93%, with significant annual fluctuations and periods of zero dividends. However, HWC maintains a healthy average payout ratio of 30.07%, lower than the 65% benchmark, indicating sustainable dividend payments and strong financial health. Stability in earnings coverage of dividends has been inconsistent, raising concerns about long-term sustainability. Cash flow coverage of dividends is also subpar with recent years showing low ratios, signaling potential risks. The company's dividends per share fell by more than 20% in some years, indicating instability which may concern income-seeking investors. On a positive note, HWC has paid dividends for over 25 years and has shown a trend of reliable stock repurchases, albeit with some inconsistencies. This mixed record showcases a need for better alignment with long-term investor expectations.

Insights for Value Investors Seeking Stable Income

If you are considering investing in Hancock Whitney (HWC), it's worth noting that the company shows a commitment to returning value to shareholders through consistent dividend payments over the long term, which may attract long-term investors. However, its relatively low dividend yield compared to the industry and the fluctuating dividend growth rate could be potential drawbacks. Additionally, the inconsistency in earnings and cash flow coverage raises concerns about the sustainability of these dividend payments. Given these factors, it may be worth considering HWC as part of a diversified portfolio rather than a sole investment, especially if you seek steady and reliable 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?

Explain the importance of dividend yield as a criterion in dividend analysis.

For 2023, Hancock Whitney (HWC) posted a dividend yield of 2.4696%, which trails the industry average of 2.76%. This indicates that HWC's dividends provide a lower return compared to the broader industry. Over the past 20 years, HWC's yields have fluctuated, peaking at 3.8141% in 2015 and dropping to as low as 1.6126% in 2003. To put it in perspective, the industry average at its peak was 4.48% in 2008, largely influenced by the financial crisis as companies sought to attract and retain investors. HWC's stock price performance, closing at $48.59 in 2023 which is considerably higher compared to previous years, suggests market confidence despite the lower relative yield. HWC's consistent dividend per share, maintained at $1.08 to $1.2 over the last decade, illustrates a steady income stream, though the yield shortfall points to a need for better alignment with industry standards. This trend is sub-optimal as investors may seek higher yields elsewhere, impacting HWC’s competitive positioning among dividend-paying stocks.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend over a specified period, often 20 years. A growth rate above 5% indicates strong, consistent increases in dividend payments, implying a company's robust financial health and management's commitment to returning value to shareholders.

Reviewing the given Dividend Ratio data for Hancock Whitney (HWC) from 2003 to 2023, there appears to be significant fluctuation. Some years report robust growth rates, such as 2003 (10%), 2004 (31.8182%), and 2017 (25%), while others like 2019 (-15%) show a sharp decline. The average Dividend Growth Rate across these years stands at approximately 5.93%, just above the 5% benchmark. However, the inconsistency and years with zero dividends, especially from 2008 to 2016, suggest an underlying volatility. This trend indicates only a marginally positive criterion but flags potential concerns regarding stable, long-term growth commitment. The large gaps of zero dividends imply caution for long-term dividend reliability.

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

The payout ratio, the percentage of earnings a company pays as dividends, reflects sustainability. A ratio below 65% is generally healthy, indicating earnings are retained for growth.

Hancock Whitney (HWC) shows an average payout ratio of roughly 30.07% over the past 20 years, substantially lower than the 65% threshold. This is a good indicator of the firm's financial health and dividend sustainability. Hovering mostly below 50%, the payout ratio showcases competent reinvestment into the business and robust earnings. Peaks slightly above this norm, such as the dramatic negative ratio in 2020 due to unusual losses, seem anomalous rather than a trend. Generally, the lower payout ratio buttresses long-term growth potential and fiscal prudence.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings ensure the company's profitability can sustain dividend payments, highlighting financial stability.

Hancock Whitney's Dividend Payout Ratio has fluctuated over the last two decades, observing several pivotal trends. The payout ratio was relatively low in early years, like 2005 and 2007, exceeding 40% coverage. However, there was a concerning, sharp decline in the payout ratio during years like 2020 at -206.9%, indicating dividends outpaced earnings — a clear unsustainable scenario, stemming from a net loss per share. This trend persists up to 2023, with a moderately low 26.32% payout ratio, meaning that while dividends are covered and potentially hint at a conservative cash outflow approach, stability in earnings is critical. Overall, this trend depicts a concerning inconsistency—wrapper for sustainability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow is crucial as it shows whether a company can sustain its dividend payouts from its free cash flow, ensuring financial stability.

Hancock Whitney (HWC) has a mixed record in terms of covering dividends with free cash flow. The coverage ratio fluctuated significantly over the years, with some years showing extremely high coverage ratios (e.g., 2006 at 7.67), suggesting strong cash flow relative to dividend payouts, while other years had notably weaker coverage (e.g., 2007 at -1.99), indicating an inability to cover dividends from cash flow. In recent years, the coverage ratio has remained relatively steady but low, ranging between 0.17 to 0.30. This below-ideal ratio may signal potential concerns regarding the sustainability of dividend payments long-term unless cash flows improve. Analyzing numbers, in 2023, the free cash flow was $470.22 million against a dividend payout of $104.70 million, resulting in a 0.22 coverage ratio, which is quite low. Thus, while current free cash flow can cover dividends, Hancock Whitney should strive for a higher coverage ratio to ensure more robust financial health.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years, where the dividend per share has not dropped by more than 20%, is critical for income-seeking investors as it indicates reliability.

Examining Hancock Whitney's (HWC) dividend history over the past two decades, we see the following trend in dividend per share values: $0.44 (2003), $0.58 (2004), $0.72 (2005), $0.895 (2006), $0.96 (2007-2008), $0.96 (2009-2016), $1.2 (2017), $1.02 (2018), $1.08 (2019-2022), and $1.2 (2023). The fact that there was a drop greater than 20%, specifically between 2017 and 2018 from $1.2 to $1.02, indicates instability during this period. This decline, being more than 20%, is a negative mark for this criterion and denotes a lack of reliability in dividend stability for income-seeking investors. Despite this, dividends appear to have maintained a stable or increasing trend outside of this drop.

Dividends Paid for Over 25 Years?

Dividend payout consistency over a long term provides investors with confidence in stable returns and indicates the company's financial health.

Hancock Whitney (HWC) has consistently paid dividends for over 25 years, from 1998 to 2023. The dividend per share has generally increased over this period, rising from $0.3333 in 1998 to $1.2 in 2023. This trend is a favorable indicator as it suggests the company has maintained a commitment to returning value to shareholders despite economic cycles and potential financial challenges. This level of consistency in dividend payout can attract long-term investors seeking reliable income streams.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Hancock Whitney (HWC) and why it is important to consider

Reliable stock repurchases indicate that a company potentially has excess capital to reward shareholders through buybacks, signaling financial health. For HWC, it's notable that the number of shares decreased during the years: 2005, 2007, 2008, 2013, 2015, 2016, and 2018, 2022. However, larger fluctuations, especially the increase seen from 2009 to 2011, suggest inconsistency. The average repurchase trend over the last 20 years stands at 6.2588% per year. Despite some repurchases, the overall trend appears to be inconsistent, which can be seen as negative if predictability and stability are valued. The substantial stock dilution following 2009 indicates major financing needs or other strategic moves that might not align with consistent shareholder value return efforts.