Updated 3/10/25
HNI Corporation (NYSE: HNI) is a name that might not pop up in every investor’s portfolio, but for those who appreciate consistency and long-term dividend stability, it deserves a closer look. Best known for its office furniture and hearth products, HNI operates in industries that ebb and flow with business spending and consumer demand. That cyclical nature means the stock isn’t always the hottest pick on Wall Street, but it does offer something that income-focused investors can appreciate—a steady dividend backed by strong cash flow.
Let’s dig into what makes HNI a compelling choice for dividend seekers and what factors investors should watch going forward.
Key Dividend Metrics
📈 Dividend Yield: 2.93%
💰 Annual Dividend Payout: $1.32 per share
📆 Payout Ratio: 45.49% (comfortable level)
📊 5-Year Average Yield: 3.52%
📅 Ex-Dividend Date: February 24, 2025
💵 Dividend Growth: Modest but consistent
Dividend Overview
HNI has built a solid reputation for returning value to shareholders, even though its dividend yield of 2.93% isn’t the highest in the market. That’s because the company focuses on stability rather than aggressive growth, which appeals to investors looking for steady income rather than rapid payout increases.
The dividend is well-covered, with a payout ratio of 45.49%. That’s an encouraging sign, showing that HNI isn’t stretching its earnings too thin to keep up with payments. A sustainable dividend like this is key for long-term investors who want to avoid companies that might cut distributions when times get tough.
Dividend Growth and Safety
While HNI has maintained a consistent dividend, its growth rate hasn’t been particularly fast. The company has a strong history of paying out dividends, but increases have been modest compared to other dividend-paying stocks in the industrial sector. That’s not necessarily a bad thing—steady and reliable beats erratic and unpredictable any day.
In terms of safety, the numbers look good. HNI generated $226.7 million in operating cash flow and $168.72 million in levered free cash flow, more than enough to cover dividends while still having room for reinvestment. The free cash flow cushion suggests that even if earnings dip in a slow economic period, HNI should be able to maintain its payouts without scrambling.
Chart Analysis
Trend Overview
HNI’s stock has been in a clear downtrend since peaking in late 2024. After a strong rally through most of last year, momentum started fading as the price failed to sustain new highs. The stock is now trading below both the 50-day moving average (SMA) and the 200-day moving average (SMA), a sign that the broader trend has shifted bearish.
The 50-day SMA, which had previously been a support level during the uptrend, is now acting as resistance. The 200-day SMA, which often represents long-term trend strength, has started to flatten out and could be rolling over. This suggests that the stock is struggling to find buyers at higher levels.
Moving Averages
The price recently crossed below the 200-day moving average, confirming a technical breakdown. The 50-day moving average has also been trending lower, indicating that the shorter-term trend remains weak. Typically, when a stock is trading below both of these key averages, it suggests that sellers are in control.
A reversal back above these levels would be necessary to shift the trend back in favor of the bulls, but right now, the stock remains under pressure.
Volume and Market Participation
Volume has been relatively low outside of a notable spike in December, which likely represented a high-volume selloff. This is often a sign of institutional distribution, where large investors exit their positions. Since then, volume has remained relatively stable but without strong accumulation, which means buyers haven’t yet stepped in with conviction.
If volume starts to rise alongside price, it could indicate that demand is returning. On the other hand, if price continues to decline on low volume, it suggests that the selling pressure is more gradual and that investors are simply stepping aside rather than panic selling.
Relative Strength Index (RSI)
The RSI is sitting in the lower range, hovering around 30, which signals that the stock is approaching oversold conditions. Typically, an RSI below 30 can indicate that a stock is undervalued in the short term, but it doesn’t guarantee an immediate rebound.
What’s important to watch is whether RSI starts to turn upward, as that could signal a potential shift in momentum. If it remains stuck near the lower range, it could mean that the stock is experiencing a prolonged period of weakness.
Price Action and Recent Candles
The past five trading sessions have shown some stabilization, with the stock holding around the $45 level. However, wicks on the upper ends of recent candles suggest that selling pressure is still present whenever price attempts to move higher.
This kind of action typically reflects weak buying interest, where investors are hesitant to push the stock higher. If this continues, the stock could drift lower as buyers wait for a more attractive entry point.
The recent lows around $44 could act as a short-term support level, but if that breaks, there could be further downside toward the $40 range, which was a key level earlier in 2024.
Earnings Report Summary
HNI Corporation’s latest earnings report was a mix of good and bad news, showing both some challenges and areas of strength. The company reported $672.2 million in revenue, which was down 5.5% from the same quarter last year. Even with that decline, profits actually increased, which is a strong sign that management is keeping costs in check and running the business efficiently.
Net income came in at $47.5 million, up 22.5% from last year’s $38.8 million. That translated into earnings per share (EPS) of $0.98, compared to $0.80 a year ago. On an adjusted basis, which removes some one-time charges, EPS was $1.03, a solid increase from $0.93 the previous year.
One bright spot was the company’s gross profit margin, which improved to 41.5%, compared to 40.1% in the previous year. This suggests that HNI is doing a better job managing costs, even in a tougher revenue environment. Operating income also climbed to $68.9 million, a 21.3% jump from last year’s $56.8 million.
Looking at HNI’s different business segments, the Workplace Furnishings division saw revenue decline by 5.9% to $505.1 million. Despite that drop, operating income in the segment actually rose by 22.1% to $57.7 million, thanks to better margins and cost controls.
The Residential Building Products business also had a slight sales decline of 4.4%, bringing in $167.1 million for the quarter. Operating income dipped slightly to $29.9 million, down 3.1%, but margins improved a little, suggesting the business is still in solid shape.
HNI’s financial position looks healthy overall. The company lowered its debt levels, with its gross leverage ratio dropping to 1.1x from 1.5x in the previous quarter. Stock buybacks were also ramped up, a signal that management believes the shares are undervalued.
Looking ahead, HNI expects low to mid-single-digit revenue growth in 2025 for both of its main segments. Workplace Furnishings orders were up 1% year-over-year, and the sales pipeline is growing. The Residential Building Products business is also seeing improving demand, with orders up 3% in the last quarter.
While there are some lingering concerns, including uncertainty around the economy and potential election-related market shifts, HNI is in a solid position. Even with sales declines, the company is keeping profits strong, setting the stage for growth in the coming year.
Financial Health and Stability
A dividend is only as good as the company paying it, and HNI’s financials show a business that, while cyclical, is on solid footing. The return on equity (ROE) sits at 17.42%, a strong indicator that management is putting capital to good use. Return on assets (ROA) at 7.16% is also a healthy figure.
Debt levels are something to keep an eye on. HNI carries $496.8 million in total debt, translating to a debt-to-equity ratio of 59.12%. While this isn’t alarmingly high, it does mean the company is somewhat reliant on leverage, which could pose challenges if interest rates remain elevated. The current ratio of 1.10 shows that the company has just enough liquidity to handle short-term obligations, but it’s not sitting on a pile of excess cash.
One small concern is the relatively low cash balance of $28.9 million. That’s not a problem when cash flow is strong, but it does mean HNI needs to keep performing well to avoid any liquidity concerns down the road.
Valuation and Stock Performance
HNI is not overpriced, at least based on traditional valuation metrics. The stock is trading at a trailing P/E ratio of 15.63 and a forward P/E of 13.12, which suggests that based on earnings expectations, it’s reasonably valued. The PEG ratio of 1.09 further indicates that the stock is in fair-value territory.
From a performance perspective, HNI has been a bit of a laggard compared to the broader market. It’s down 1.44% in the latest session, trading at $44.36 per share. Over the past year, the stock has ranged between $40.94 and $58.42, with its 50-day moving average at $48.77 and its 200-day moving average at $50.35.
For investors who track relative performance, it’s worth noting that HNI’s 6.21% gain over the past year is well below the S&P 500’s 12.74% increase. That could suggest that while the company is solid, it hasn’t been a market favorite recently.
Risks and Considerations
Every stock has risks, and HNI is no exception. Here are some things to keep in mind before making a long-term commitment:
⚠️ Cyclical Business Model: The office furniture sector moves with business investment cycles, and hearth products are seasonal. Economic downturns could lead to weaker demand.
⚠️ Dividend Growth is Slow: While the payout is steady, it’s not growing rapidly. Investors looking for high dividend growth may find better opportunities elsewhere.
⚠️ Debt Levels: While manageable, debt remains a factor. A prolonged economic slowdown or continued high interest rates could put pressure on financials.
⚠️ Stock Performance Has Lagged: HNI hasn’t kept up with broader market gains, which may be a sign that investors see better opportunities elsewhere.
Final Thoughts
HNI Corporation is not the flashiest stock out there, but it’s a solid choice for investors who prioritize stability and income. The 2.93% dividend yield isn’t the highest, but it’s backed by strong cash flow, a reasonable payout ratio, and a long history of consistent payments.
The biggest knock on HNI is its slow dividend growth and its exposure to cyclical industries. If the economy takes a hit, HNI’s earnings could decline, but its current financial position suggests that the dividend is still safe.
For investors who are comfortable with a moderate yield, a steady payout, and some economic sensitivity, HNI is worth considering as part of a balanced income portfolio.
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