Updated 3/10/25
Hillenbrand, Inc. (HI) is an industrial manufacturing company with a diverse portfolio of businesses. It operates across several sectors, including plastics, recycling, and industrial automation. While the company has a long history, its stock has faced some challenges, recently trading at $26.16, down nearly 5% in a single session.
For investors focused on dividends, Hillenbrand offers a 3.27% forward yield, which is higher than its historical average. But with the company experiencing declining earnings and a heavy debt load, it’s important to dig deeper into the numbers to understand whether the dividend is sustainable in the long run.
Key Dividend Metrics
📌 Dividend Yield: 3.27%
📌 Annual Dividend Per Share: $0.90
📌 Payout Ratio: 75% (on the higher side)
📌 5-Year Average Dividend Yield: 2.23%
📌 Dividend Growth Streak: Slow, but consistent increases
📌 Ex-Dividend Date: March 14, 2025
📌 Next Payment Date: March 31, 2025
Dividend Overview
Hillenbrand has been a reliable dividend payer for years, and right now, its yield is well above its five-year average of 2.23%. This suggests that the stock price has dropped faster than the dividend has grown, making the current yield appear more attractive.
That being said, the payout ratio of 75% is getting into risky territory. Ideally, companies should keep this number below 60% to ensure they can reinvest in the business while maintaining dividend payments. With earnings under pressure, it’s worth questioning whether the company can continue raising its dividend at the same pace.
Dividend Growth and Safety
Hillenbrand has managed to increase its dividend consistently over the years, but the growth has been relatively slow. The company’s ability to keep raising its dividend will largely depend on earnings stabilizing.
One major concern is the company’s declining profitability. Net income has dropped 62.8% year-over-year, and with a negative profit margin of -7.12%, there isn’t much breathing room.
On a more positive note, free cash flow is healthier than reported earnings, with levered free cash flow at $250.54 million. This means the company still generates cash, which could help keep dividends intact in the short term. But if profitability doesn’t recover, future increases could be minimal.
Chart Analysis
The stock chart for Hillenbrand, Inc. (HI) paints a picture of a long-term downtrend, with recent attempts at recovery facing resistance. A combination of moving averages, volume trends, and momentum indicators provides a clearer view of where the stock stands right now.
Price Action and Trend
The stock has been trending lower for the better part of the last year, with a clear downward slope in both the 50-day and 200-day moving averages. The 200-day moving average is acting as a ceiling, with price failing to break above it in multiple instances. That’s typically a sign that the broader trend is still bearish.
More recently, the stock attempted to stabilize around the $30 mark, but sellers stepped in, pushing it back down. The latest price of $27.53 suggests a retest of support near the recent lows.
Moving Averages
The 50-day moving average remains below the 200-day moving average, confirming that the stock is still in a bearish cycle. This is known as a death cross, a pattern that usually signals further downside unless a strong reversal occurs.
The stock briefly attempted to push above the 50-day moving average in early February, but resistance held strong, leading to the latest decline. Until the price sustains above this level, momentum will likely stay weak.
Volume Activity
Volume has been relatively low in the past few weeks, indicating a lack of strong buying interest. There were a couple of spikes in volume during the October and February rallies, but those surges didn’t have enough follow-through to shift the overall trend.
Low volume during sell-offs can sometimes indicate that selling pressure is easing, but given the stock’s longer-term weakness, it’s not enough to suggest a reversal just yet. A significant increase in volume on an upward move would be a stronger signal of potential recovery.
Relative Strength Index (RSI)
The RSI indicator is hovering near 30, which is approaching oversold territory. This suggests that the stock may be nearing a point where it could see a short-term bounce. However, RSI has remained weak for most of the past year, which reinforces the broader bearish sentiment.
The last time RSI pushed toward 70, the stock saw a brief rally but quickly reversed, aligning with price resistance near the 200-day moving average. If RSI moves higher without a corresponding price increase, it could indicate a weak rally that fails to gain traction.
Analyst Ratings
Hillenbrand, Inc. (HI) has received a mix of analyst opinions recently, highlighting both growth potential and financial concerns. Below is a summary of recent upgrades and downgrades, along with the latest consensus price targets.
📈 Upgrades
🔹 CL King Initiation – A major brokerage firm initiated coverage on Hillenbrand with a Strong Buy rating and a price target of $61. The firm pointed to the company’s strong industrial presence and long-term growth potential as key reasons for the optimistic outlook.
🔹 KeyBanc Initiation – Analysts at another investment firm gave an Overweight rating with a target of $50. They emphasized the company’s diversified business model and the ability to expand profit margins despite recent headwinds.
📉 Downgrades
⚠️ DA Davidson Downgrade – Analysts lowered their rating from Buy to Neutral and adjusted the price target from $54 to $33. Their downgrade was largely driven by concerns over shrinking profit margins and the company’s increasing debt burden.
⚠️ DA Davidson Reiteration – The same firm maintained its Neutral rating a few months later, keeping the price target at $33. Their analysts cited ongoing operational challenges and market volatility as reasons for a cautious stance.
🎯 Consensus Price Target
The current consensus price target for Hillenbrand sits around $36.50, with estimates ranging from $33 to $45. With the stock currently trading near $27.53, this implies a potential upside of approximately 32% over the next year if the company can improve its earnings trajectory and stabilize key financial metrics.
These mixed signals from analysts suggest that while there is upside potential, investors should closely monitor earnings trends and debt management before making any major decisions.
Earnings Report Summary
Hillenbrand, Inc. just released its latest earnings report, and while there were some bright spots, the overall numbers show a company navigating some challenges. Revenue for the quarter came in at 706.9 million, which is down from 773.3 million in the same quarter last year. A big part of that drop came from lower volumes in the Advanced Process Solutions and Molding Technology Solutions segments, signaling some softness in demand.
Even with the revenue decline, the company managed to improve its gross profit margin, which ticked up to 33.2 percent from 32.5 percent last year. That’s largely thanks to better pricing strategies and productivity improvements. However, operating expenses climbed to 171.1 million, up from 157.9 million, mainly due to costs tied to acquisitions and integration efforts. When all was said and done, net income for the quarter fell to 8.9 million, down from 19.2 million the previous year.
On the cash flow side, things are looking a little better. The company used 11.3 million in operating activities, which is an improvement compared to the 24 million used in the same period last year. That suggests some better management of working capital, even in the face of weaker sales.
Looking at the individual business segments, Advanced Process Solutions saw its revenue drop to 511.1 million from 568.3 million, and Molding Technology Solutions brought in 195.8 million, slightly lower than the 205 million from the year before. Both declines were tied to lower demand for certain equipment, especially in injection molding and hot runner systems.
One of the biggest moves Hillenbrand made during the quarter was announcing the sale of a 51 percent stake in its Milacron injection molding and extrusion business to Bain Capital. That deal is expected to close sometime in mid-2025, and it’s part of the company’s broader effort to refine its focus and streamline operations.
Overall, this earnings report paints a picture of a company dealing with some industry headwinds. Sales are down, profits are under pressure, but Hillenbrand is making strategic moves to adjust, including optimizing its business portfolio. The coming quarters will be key in seeing how well these decisions play out.
Financial Health and Stability
Hillenbrand carries a significant debt load of $2.06 billion, with a debt-to-equity ratio of 145.31%. That’s high enough to warrant attention. While debt isn’t necessarily a problem for industrial companies, it does mean a larger portion of cash flow will go toward interest payments rather than dividends or growth initiatives.
On the liquidity side, the company has $208 million in cash and a current ratio of 1.34, meaning it has enough short-term assets to cover near-term liabilities. That’s a decent cushion, but not overly strong given its debt obligations.
Valuation and Stock Performance
Right now, Hillenbrand is trading at a price-to-earnings ratio of 36.17, which looks expensive given the company’s earnings decline. However, its price-to-sales ratio of 0.62 and price-to-book ratio of 1.40 suggest the stock is cheaper than historical levels.
From a technical standpoint, the stock is struggling. It has dropped over 43% from its 52-week high and remains well below its 50-day moving average of $31.96 and 200-day moving average of $34.04. The market clearly has concerns about its near-term outlook, and the downward momentum doesn’t show signs of reversing just yet.
Risks and Considerations
Hillenbrand’s dividend looks safe for now, but there are several risks that could change that:
⚠️ Declining Earnings – A 62.8% drop in net income puts pressure on the company’s ability to maintain or grow its dividend.
⚠️ High Debt Load – A 145.31% debt-to-equity ratio means a lot of cash goes toward debt payments.
⚠️ Stock Volatility – Shares are down 43% from their highs, and further declines could signal deeper issues.
⚠️ Cyclical Business Exposure – The company operates in industrial manufacturing, which is vulnerable to economic downturns.
Final Thoughts
Hillenbrand offers an attractive 3.27% dividend yield, which is higher than its historical norm. The company has been a consistent dividend payer, but earnings pressure, a high payout ratio, and significant debt levels create some concerns about long-term sustainability.
For those comfortable with some risk, the current valuation suggests the stock might be undervalued based on price-to-sales and book value metrics. However, keeping an eye on future earnings reports and debt management will be key to ensuring the dividend remains secure.
Recent Comments