Scrutinizing the Sustainability and Growth of Hydro One Ltd's Dividends
Hydro One Ltd (HRNNF, Financial) recently announced a dividend of $0.3 per share, payable on 2024-03-28, with the ex-dividend date set for 2024-03-12. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Hydro One Ltd's dividend performance and assess its sustainability.
What Does Hydro One Ltd Do?
Hydro One operates regulated transmission and distribution assets in Ontario. The area's largest electricity provider serves nearly 1.5 million customers. Transmission accounts for roughly 60% of the company's rate base, with distribution accounting for the remainder. Hydro One operates a small telecom business with annual revenue contributing less than 1% to consolidated results. The province of Ontario holds an approximate 47% common equity stake.
A Glimpse at Hydro One Ltd's Dividend History
Hydro One Ltd has maintained a consistent dividend payment record since 2016. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Hydro One Ltd's Dividend Yield and Growth
As of today, Hydro One Ltd currently has a 12-month trailing dividend yield of 2.86% and a 12-month forward dividend yield of 2.88%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Hydro One Ltd's annual dividend growth rate was 5.30%. Extended to a five-year horizon, this rate decreased to 5.10% per year. Based on Hydro One Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Hydro One Ltd stock as of today is approximately 3.67%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Hydro One Ltd's dividend payout ratio is 0.61.
Hydro One Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Hydro One Ltd's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported net profit in 9 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Hydro One Ltd's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Hydro One Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Hydro One Ltd's revenue has increased by approximately 2.50% per year on average, a rate that underperforms approximately 75.66% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Hydro One Ltd's earnings increased by approximately 6.20% per year on average, a rate that underperforms approximately 47.67% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 5.70%, which underperforms approximately 46.91% of global competitors.
Next Steps
In conclusion, Hydro One Ltd's upcoming dividend payment is a testament to its consistent dividend history. The company's dividend growth rate, combined with a reasonable payout ratio, underscores its commitment to returning value to shareholders. Coupled with a profitability rank that suggests strong earnings potential, Hydro One Ltd appears to be in a good position to maintain its dividend payments. However, growth metrics indicate some challenges ahead, as revenue and earnings growth rates lag behind many global competitors. Investors should weigh these factors, along with the broader industry and economic trends, when considering Hydro One Ltd's long-term dividend prospects. For those seeking high-dividend yield opportunities, GuruFocus Premium users can utilize the High Dividend Yield Screener to discover similar investment options.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
