Today is Friday, May 10, 2019, and this is your daily dividend safety update. Today we’re looking at Hanesbrands (NYSE: HBI) stock to see whether its 3.51% dividend is safe.
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Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
Hanesbrands has a payout ratio of 39.14%. That’s low enough for us! Payout ratio equals dividends per share divided by earnings per share. A low payout ratio indicates that the company has plenty of money to cover its dividend. We’d be more concerned if the ratio was closer to 100% (or over it).
Cash Flow Growth Year-Over-Year
Hanesbrands has not grown its cash flow in the last year. That’s a bad omen for dividend investors. No cash flow means no dividend, so if cash flow isn’t growing, that’s a problem for us.
Dividend History & Recent Cuts
Hanesbrands has not cut its dividend in the recent past. That’s a good sign. It’s not a guarantee that the company will never cut its dividend, but companies that have cut their dividends recently are generally more likely to cut them again.
Hanesbrands stock has failed 1 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is possible in the next few years.
Are you worried about the safety of your dividend stocks? Is there a particular stock you want us to grade next? Leave the ticker symbol in the comment section below.