An in-depth look at Hydro One Ltd's dividend history, yield, growth rates, and sustainability prospects
Hydro One Ltd(HRNNF, Financial) recently announced a dividend of $0.3 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-12. As investors eagerly anticipate this upcoming payment, it's also crucial to examine the company's dividend history, yield, and growth rates. Leveraging data from GuruFocus, we delve into Hydro One Ltd's dividend performance and assess its sustainability.
Understanding Hydro One Ltd's Business Model
Hydro One operates regulated transmission and distribution assets in Ontario. As the largest electricity provider in the area, it serves nearly 1.5 million customers. Transmission accounts for approximately 60% of the company's rate base, with distribution making up the remainder. Hydro One also operates a small telecom business, contributing less than 1% to consolidated results. The province of Ontario holds an approximate 47% common equity stake.
Tracing Hydro One Ltd's Dividend History
Hydro One Ltd has consistently distributed dividends since 2016, with payments made on a quarterly basis. The chart below illustrates the annual Dividends Per Share for historical trend analysis.
Dissecting Hydro One Ltd's Dividend Yield and Growth
At present, Hydro One Ltd boasts a 12-month trailing dividend yield of 3.22% and a 12-month forward dividend yield of 3.39%, indicating an anticipated increase in dividend payments over the coming year.
Over the past three years, Hydro One Ltd's annual dividend growth rate was 5.00%. Extending to a five-year horizon, this rate decreased slightly to 4.90% per annum. Based on these figures, the 5-year yield on cost of Hydro One Ltd stock stands at approximately 4.09% today.
Evaluating Dividend Sustainability: Payout Ratio and Profitability
To determine the sustainability of its dividend, it's essential to examine Hydro One Ltd's payout ratio. The dividend payout ratio offers insight into the portion of earnings distributed as dividends. A lower ratio suggests the company retains a significant part of its earnings, ensuring funds for future growth and unexpected downturns. As of 2023-06-30, Hydro One Ltd's dividend payout ratio is 0.66.
Hydro One Ltd's profitability rank offers an understanding of the company's earnings prowess relative to its peers. With a rank of 7 out of 10 as of 2023-06-30, Hydro One Ltd suggests good profitability prospects. The company has reported net profit in 9 of the past 10 years.
Assessing Future Prospects: Growth Metrics
For dividends to be sustainable, a company must exhibit robust growth metrics. Hydro One Ltd's growth rank of 7 out of 10 suggests a positive growth trajectory relative to its competitors.
Revenue is vital for any company, and Hydro One Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. With an average increase of approximately 6.20% per year, Hydro One Ltd's revenue growth rate underperforms approximately 57.05% 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 10.40% per year on average, a rate that underperforms approximately 37.98% of global competitors.
Conclusion
Given Hydro One Ltd's consistent dividend payments, steady growth rate, reasonable payout ratio, good profitability, and promising growth metrics, it appears to be a potential candidate for dividend-focused investors. However, investors should always conduct their own thorough research before making investment decisions.
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