Updated 3/10/25
Hawkins, Inc. (HWKN) may not be the first name that comes to mind for dividend investors, but this specialty chemicals and ingredients distributor has quietly built a solid reputation for financial strength and steady payouts. Founded in 1938, the company serves a variety of industries, including water treatment, industrial chemicals, and food ingredients. Its diversified business model has allowed it to generate consistent cash flow, a critical factor for maintaining and growing dividends.
While Hawkins doesn’t offer the kind of high yield that income-focused investors typically chase, it makes up for it with strong fundamentals, a low payout ratio, and a history of steady dividend increases. Below, we’ll dive into the company’s dividend performance, financial health, valuation, and potential risks to see if it deserves a place in a long-term income portfolio.
Key Dividend Metrics
📌 Dividend Yield: 0.69% (Forward), 0.65% (Trailing)
📌 Annual Dividend: $0.72 per share (Forward)
📌 Payout Ratio: 17.39% (Low, allowing room for growth)
📌 5-Year Average Yield: 1.29%
📌 Dividend Growth Streak: Consistent increases over the years
📌 Next Dividend Payment: February 28, 2025
📌 Ex-Dividend Date: February 14, 2025
Dividend Overview
Hawkins is not the kind of stock you buy for immediate high-yield income, but it does provide a reliable, growing payout backed by strong cash flow. At just under 1%, the dividend yield is relatively low, yet the company’s history of steady increases suggests a long-term commitment to rewarding shareholders.
The most reassuring number for dividend investors is the payout ratio, which sits at only 17.39%. This means the company is using less than a fifth of its earnings to pay dividends, leaving plenty of room for future increases while still funding business growth.
For investors who value stability, Hawkins has proven itself to be a consistent performer. It has maintained and grown its dividend without taking on excessive debt or overextending its financial resources—an important factor for long-term investors looking to avoid dividend cuts.
Dividend Growth and Safety
One of the standout aspects of Hawkins’ dividend profile is its conservative yet consistent approach to growth. While it doesn’t increase payouts aggressively, it has built a track record of raising dividends at a manageable pace, ensuring sustainability over the long run.
A key factor in Hawkins’ ability to maintain and grow its dividend is its strong cash flow. The company generated $122.14 million in operating cash flow over the last year, with levered free cash flow of $65.4 million. These numbers indicate that Hawkins has more than enough financial flexibility to continue increasing its payout without putting strain on its balance sheet.
Additionally, the company’s current ratio of 2.50 suggests a strong liquidity position. This is a positive signal for investors, as it means Hawkins has the ability to cover its short-term obligations without financial stress.
Chart Analysis
Trend and Moving Averages
The chart for Hawkins, Inc. (
) shows a strong uptrend throughout most of last year, but momentum has shifted in recent months. The 50-day moving average, which had been acting as a support level, has now turned downward and crossed below the 200-day moving average. This kind of movement, often referred to as a death cross, can signal a weakening trend and potential for further downside pressure.
The stock price has also dipped below both moving averages, which adds to the bearish sentiment. However, it appears to be stabilizing just above the $100 mark, suggesting that buyers are stepping in at this psychological level. If the stock fails to reclaim the 50-day moving average soon, further consolidation or downside could be in play.
Volume Activity
Volume has tapered off after some high-activity spikes late last year. The large spikes in volume around October and November were accompanied by price swings, indicating heavy participation from both buyers and sellers. More recently, volume has remained relatively muted, suggesting indecisiveness in the market.
When a stock experiences a decline on low volume, it sometimes indicates a lack of strong selling conviction. But without a noticeable pickup in buying interest, the price may struggle to reverse the downtrend in the near term.
RSI and Momentum
The Relative Strength Index (RSI) at the bottom of the chart shows a steady decline from its previous highs, confirming the loss of bullish momentum. The RSI dipped into oversold territory earlier this year and has since started to recover, but it remains in the lower half of its range.
A gradual uptick in RSI can be a sign that selling pressure is easing, but without a strong push above 50, the momentum still favors the bears. If the RSI starts making higher lows while the stock price remains stable, it could be an early indication that buyers are regaining control.
Recent Price Action
The last five candles on the chart show some stability after a period of weakness. There have been a few days where the stock tested lower levels but managed to close near its opening price, a sign that selling pressure is being met with buying interest. However, the absence of strong bullish candles suggests that buyers are not yet confident enough to take control.
If the price can hold above $100 and start forming higher lows, it may build a base for a potential rebound. On the other hand, if selling pressure resumes and the stock breaks below this level, it could signal another leg down.
Analyst Ratings
📈 In recent months, Hawkins, Inc. (HWKN) has experienced notable shifts in analyst evaluations, reflecting both positive and cautious sentiments.
Upgrade to Buy
📊 On August 7, 2023, BWS Financial analyst Hamed Khorsand upgraded Hawkins from a Hold to a Buy rating, setting a price target of $62. This upgrade was attributed to the company’s robust financial performance, particularly in its water treatment segment, which had surpassed industrial sales to become the largest source of revenue. The analyst noted that the company’s strategic focus on this segment, coupled with effective cost management, positioned it well for future growth.
Downgrade to Neutral
📉 However, on October 16, 2024, the same analyst downgraded Hawkins back to a Neutral rating, maintaining the price target at $122. This shift was due to a decline in industrial sales, which had impacted overall earnings. The analyst expressed concerns over lower selling prices for industrial chemicals, leading to earnings per share falling short of expectations. The ongoing assumption that these lower average selling prices in the industrial segment would persist further contributed to the cautious outlook.
Consensus Price Target
💰 The consensus among analysts sets the 12-month price target for Hawkins at $122, suggesting a potential upside from the current trading price. This target reflects a balanced view, considering both the company’s strengths in certain segments and the challenges it faces in others.
📌 These evaluations underscore the dynamic nature of Hawkins’ market position, influenced by its diverse business segments and external economic factors. Investors are advised to monitor these developments closely when considering their investment strategies.
Earnings Report Summary
Hawkins, Inc. just released its third-quarter fiscal 2025 earnings, and the results show steady growth with a few bumps along the way. The company continues to expand its business, particularly in water treatment, while navigating some pricing pressures in its industrial segment.
Revenue and Profitability
For the quarter, Hawkins reported revenue of $226.2 million, an 8% increase from last year’s $208.5 million. Gross profit also improved, coming in at $48.4 million compared to $42.2 million in the previous year. Operating income was up 14%, and pretax income climbed 12%, signaling that the company is managing its costs effectively while still growing its top line.
Performance Across Segments
- Water treatment was the clear winner this quarter, with revenue jumping 22% to $99.8 million. This growth was fueled by strong organic volume increases and the impact of recent acquisitions.
- Industrial sales faced a bit of a slowdown, mainly due to lower selling prices as commodity costs came down. That said, the company still saw a slight uptick in overall volume, which is a good sign that demand is holding steady.
- Health and nutrition also saw positive momentum, with sales increasing thanks to strong demand for manufactured products. This segment has been a consistent performer for Hawkins, helping diversify its revenue streams.
Hawkins’ net income for the quarter came in at $15 million, slightly up from $14.9 million last year. Earnings per share (EPS) held steady at $0.72. While that might not seem like a big jump, it’s important to note that last year’s EPS was boosted by a one-time tax benefit. The fact that the company kept earnings consistent despite that advantage fading is a solid indicator of financial strength.
Balance Sheet and Cash Flow
Hawkins continues to keep its finances in check. The company borrowed $10 million to fund its acquisition of Water Guard, which expands its water treatment business into North Carolina. Even with this investment, its leverage ratio remains low at 0.7x trailing 12-month EBITDA, meaning the company isn’t overextending itself financially.
Looking Ahead
The company expects continued growth in its water treatment and health and nutrition segments, while industrial should remain steady. Strategic acquisitions and organic growth are keeping Hawkins on the right path, and the company seems well-positioned to build on its success moving forward.
Financial Health and Stability
Hawkins operates with a solid financial foundation, which is crucial for any dividend-paying stock. The company has a manageable debt load, with total debt sitting at $124.41 million and a debt-to-equity ratio of 27.22%. This relatively low level of debt ensures that interest payments won’t eat into cash flow, leaving more room for continued dividend payments and business reinvestment.
Profitability metrics also paint a strong picture:
✔ Profit Margin: 8.60% (Healthy for an industrial distributor)
✔ Operating Margin: 9.31% (Indicates solid operational efficiency)
✔ Return on Equity (ROE): 19.24% (A sign of strong management effectiveness)
✔ Return on Assets (ROA): 10.61% (Better than many industry peers)
A company with this kind of profitability, combined with a reasonable debt load, is far less likely to experience financial difficulties that could impact its dividend.
Valuation and Stock Performance
Hawkins’ stock has been on a strong run, significantly outperforming the broader market. The stock is up nearly 45% over the past year, far exceeding the S&P 500’s gain of around 12%.
In terms of valuation, Hawkins is not a cheap stock, but it’s also not outrageously expensive. The current price-to-earnings (P/E) ratio stands at 26.59, which is slightly on the higher side, but the forward P/E of 24.45 suggests expectations for continued earnings growth.
Other key valuation metrics include:
🔹 Price-to-Sales: 2.29 (Reasonable for a steady-growth business)
🔹 Price-to-Book: 4.76 (Somewhat elevated but justified by profitability)
🔹 Enterprise Value/EBITDA: 14.81 (Suggests fair valuation, not overextended)
While the stock isn’t necessarily undervalued, investors seem willing to pay a premium for its strong earnings growth and financial stability.
Risks and Considerations
While Hawkins has a lot going for it, there are some factors to keep in mind before jumping in:
🚨 Low Dividend Yield – The yield is below 1%, which may not be appealing for those who rely on dividends for passive income.
🚨 Valuation – The stock has had a strong run, and while not drastically overvalued, it may not offer a deep-value entry point at current prices.
🚨 Economic Sensitivity – Hawkins’ business is tied to industrial and municipal demand, meaning an economic slowdown could impact revenue.
🚨 Stock Price Volatility – After a significant price increase, there’s always the possibility of a pullback, particularly if market sentiment shifts.
Final Thoughts
Hawkins, Inc. is a well-run company with a conservative dividend strategy, strong financials, and a solid history of growth. While it may not be the best choice for investors seeking high immediate yield, it’s a reliable option for those looking for steady dividend growth paired with long-term capital appreciation.
For investors who prioritize financial stability and sustainable dividend growth over sheer yield, Hawkins presents an attractive option. However, those looking for a high-income stream may need to look elsewhere.
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