The board of Hallenstein Glasson Holdings Limited (NZSE:HLG) has announced that it will be paying its dividend of NZ$0.3354 on the 12th of December, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 5.6%, which is fairly typical for the industry.

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Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, Hallenstein Glasson Holdings was paying out 83% of earnings, but a comparatively small 45% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 39.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 68% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Hallenstein Glasson Holdings

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of NZ$0.31 in 2015 to the most recent total annual payment of NZ$0.55. This implies that the company grew its distributions at a yearly rate of about 5.9% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Hallenstein Glasson Holdings has impressed us by growing EPS at 7.3% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Hallenstein Glasson Holdings that investors need to be conscious of moving forward. Is Hallenstein Glasson Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.