Why You Might Be Interested In Hiscox Ltd (LON:HSX) For Its Upcoming Dividend

Simply Wall St · 04/19 08:16

Hiscox Ltd (LON:HSX) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is two business days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Hiscox's shares on or after the 24th of April will not receive the dividend, which will be paid on the 9th of June.

The company's next dividend payment will be US$0.299 per share. Last year, in total, the company distributed US$0.43 to shareholders. Looking at the last 12 months of distributions, Hiscox has a trailing yield of approximately 2.8% on its current stock price of UK£11.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Our free stock report includes 2 warning signs investors should be aware of before investing in Hiscox. Read for free now.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hiscox is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

View our latest analysis for Hiscox

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

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LSE:HSX Historic Dividend April 19th 2025

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Hiscox has grown its earnings rapidly, up 61% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hiscox's dividend payments per share have declined at 7.9% per year on average over the past 10 years, which is uninspiring. Hiscox is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Has Hiscox got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Hiscox ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Hiscox for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Hiscox (including 1 which can't be ignored).

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.