Why You Might Be Interested In Hibbett, Inc. (NASDAQ:HIBB) For Its Upcoming Dividend

Hibbett, Inc. (NASDAQ:HIBB) stock is about to trade ex-dividend in two days. Typically, the ex-dividend date is one business day 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. Meaning, you will need to purchase Hibbett's shares before the 8th of December to receive the dividend, which will be paid on the 21st of December.

The upcoming dividend for Hibbett will put a total of US$0.25 per share in shareholders' pockets. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Hibbett

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hibbett is paying out just 4.4% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Hibbett has grown its earnings rapidly, up 33% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Hibbett looks like a promising growth company.

This is Hibbett's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

The Bottom Line

Should investors buy Hibbett for the upcoming dividend? Companies like Hibbett that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Hibbett more closely.

So while Hibbett looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 3 warning signs with Hibbett (at least 1 which is a bit unpleasant), and understanding these should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.