Updated 3/10/25
Hooker Furnishings Corporation (NASDAQ: HOFT) is a well-established name in the furniture industry, with nearly a century of experience crafting stylish and durable home furnishings. The company specializes in casegoods, upholstery, and home office furniture, serving both residential and commercial markets.
Despite its long history, the company has faced some financial turbulence, with its stock price taking a sharp hit over the past year. For income-focused investors, the big question is whether HOFT’s dividend is sustainable or if it’s at risk of being cut. Let’s take a closer look at the numbers and what they mean for dividend investors.
Key Dividend Metrics
📌 Forward Dividend Yield: 7.44% – A high yield that’s well above market averages.
📌 Payout Ratio: 650% – A concerning figure that suggests the company is paying out far more than it earns.
📌 5-Year Average Dividend Yield: 4.05% – Historically lower, meaning the recent increase is due to the stock price drop.
📌 Dividend Growth: Moderate – The company has maintained its dividend but hasn’t significantly increased payouts.
📌 Ex-Dividend Date: March 17, 2025 – Investors looking to collect the next payout need to be aware of this date.
📌 Stock Performance: Down 46.57% over the past year – A sharp decline, which explains the elevated yield.
Dividend Overview
At first glance, a 7.44% dividend yield looks attractive for income investors, but the underlying financials paint a different picture. The company is paying out significantly more in dividends than it earns, as shown by the massive 650% payout ratio. When a company’s payout ratio climbs above 100%, it means it’s using cash reserves or debt to maintain its dividend—neither of which is sustainable for the long run.
Hooker Furnishings has kept its dividend at $0.92 per share annually, but with declining earnings, the risk of a cut is growing. If profits don’t rebound soon, management may have no choice but to trim or suspend payouts to preserve cash.
Dividend Growth and Safety
Hooker Furnishings has been a steady dividend payer, but there hasn’t been much in the way of growth. The company’s 5-year average dividend yield is 4.05%, meaning the current yield is inflated primarily due to the stock’s sharp decline.
Is the Dividend Safe?
🔴 The payout ratio is dangerously high, signaling an unsustainable situation.
🔴 The company reported a net loss of $9.76 million, meaning dividends are being paid from sources other than profits.
🟢 On the positive side, the company has $20.41 million in cash, which could temporarily support the dividend.
With earnings in the red, maintaining the dividend at current levels may not be realistic for much longer. Unless profitability improves, a dividend cut seems inevitable.
Chart Analysis
Overall Trend
The chart for Hooker Furnishings (HOFT) shows a clear downtrend over the past year. The stock was trading above $20 at one point but has steadily declined to the current level of $12.40. The 50-day moving average (light blue line) has been below the 200-day moving average (dark blue line) for quite some time, reinforcing the bearish sentiment surrounding this stock.
There was a period of sideways movement in the latter half of last year, with a few spikes in price, but ultimately, the downtrend resumed. The recent price action suggests the stock is struggling to hold key support levels.
Moving Averages
The 50-day moving average is significantly below the 200-day moving average, which is a classic bearish signal. This indicates that short-term momentum remains weak, and there is no confirmation yet of a potential reversal. The stock would need to regain strength and trade above these moving averages for a meaningful trend change to occur.
Additionally, both moving averages are sloping downward, suggesting the broader trend is still working against any short-term bounce attempts.
Volume Analysis
Looking at the volume bars below the price chart, there were a few notable spikes in trading activity, particularly during the sharp declines. This high-volume selling pressure suggests that investors were offloading shares aggressively at certain points.
More recently, trading volume has been lower but still active. There hasn’t been a surge in buying volume, which would be necessary to signal strong accumulation or a potential reversal. The lack of conviction from buyers further reinforces the downtrend.
Relative Strength Index (RSI)
The RSI indicator is hovering in a lower range, reflecting the stock’s prolonged weakness. While it is not deeply oversold, it is still sitting below the neutral 50 level, which typically suggests that sellers remain in control.
If RSI were to drop into oversold territory below 30 and then bounce, it could indicate a potential short-term buying opportunity. However, with the overall trend still bearish, any short-term rallies would need confirmation with stronger volume and price movement.
Recent Price Action
The last few candlesticks show the stock trying to stabilize around the $12 level, but the momentum remains weak. The wicks on recent candles suggest that there is some buying interest at lower prices, but not enough to push the stock meaningfully higher.
If the stock continues to hover around this area and fails to rebound, it could indicate further downside pressure. A break below $12 would likely invite more selling, whereas a push above the 50-day moving average could be an early signal of strength.
Analyst Ratings
📈 Recent Upgrades
Some analysts maintain a positive outlook on Hooker Furnishings (HOFT), highlighting its strong brand presence and potential for operational recovery. Those with a favorable stance believe that the company’s ongoing cost-cutting initiatives and supply chain optimizations could help improve profitability over time. Supporters of the stock argue that if consumer demand stabilizes and efficiency measures take effect, HOFT could see renewed growth.
📉 Recent Downgrades
On the other hand, some analysts have taken a more cautious approach, recently downgrading the stock from hold to sell. Concerns stem from continued revenue declines, weak earnings, and pressure on profit margins. A key point of concern has been the high dividend payout ratio, which raises questions about whether the company can sustain its current yield without improvements in financial performance.
💰 Consensus Price Target
The current one-year price target for HOFT sits at 20.40, indicating potential upside from its recent trading levels. However, price targets vary, with the low-end estimate at 20.20 and the high-end projection at 21.00. While some analysts expect a moderate rebound, others remain skeptical about the company’s ability to drive meaningful growth in the near term.
🔍 What’s Driving These Ratings?
The optimistic case for HOFT revolves around its ability to stabilize operations, improve efficiency, and capitalize on potential demand rebounds in the furniture industry. Analysts with a positive outlook believe that if management can execute its turnaround strategy, the stock may recover.
On the downside, those with a bearish stance focus on the company’s ongoing financial struggles, including negative earnings trends and a high payout ratio that could force a dividend cut. Without a clear path to profitability, they argue that HOFT could continue facing downward pressure.
With analysts split on the stock’s future, investors should consider both perspectives when evaluating the risk and reward of holding HOFT in their portfolios.
Earnings Report Summary
Hooker Furnishings had a rough third quarter, as the slowdown in the home furniture market continued to weigh on its performance. Sales came in at $104.35 million, down 10.7% from the same period last year. The company is feeling the effects of weaker consumer demand, a trend that has been dragging down the industry for months.
Looking at the different parts of the business, the Hooker Branded segment saw sales decline 10.7%, mainly due to lower average selling prices and a slight dip in volume. The segment also posted an operating loss of $1.7 million, with some of that tied to severance costs from recent cost-cutting efforts.
The Home Meridian division had a similar drop, with sales sliding 11.8%. One of the big blows here was the bankruptcy of a major customer, which took a chunk out of revenue. Despite that, the segment’s gross margin hit 20.5%, the best it’s been since 2016, thanks to restructuring efforts and a focus on more profitable product lines.
The Domestic Upholstery segment didn’t escape the downturn either, reporting a 9.9% drop in sales. However, there was one bright spot—Sunset West, the outdoor furniture brand, posted a 9.1% sales increase, making it the only part of the business showing growth for three straight quarters.
On the profitability side, Hooker Furnishings saw gross profit drop to $24 million, compared to $33.7 million last year. Gross margin also took a hit, falling from 28.9% to 23%, largely because of markdowns to clear out excess inventory. The company also swung to an operating loss of $7.3 million, a sharp reversal from the $8.8 million operating profit in the same quarter last year.
Several one-time costs played a role in those losses. The company spent $3.1 million on restructuring, had a $2.4 million bad debt charge from a customer bankruptcy, and recorded a $2 million impairment charge on some intangible assets. All of this pushed the bottom line into the red, with a net loss of $4.13 million, compared to a $7.04 million profit a year ago. That translated to a loss of $0.39 per share, a big swing from last year’s $0.65 per share earnings.
Cash reserves took a hit too, with cash and equivalents down to $20.4 million, a drop of $22.7 million since January. Inventory levels actually rose slightly, up $4.7 million, mostly due to an increase in Hooker Branded product stock.
On the spending side, the company used cash to cover $7.4 million in dividends, $2.8 million for a cloud-based ERP system, and $2.7 million in capital expenditures. Despite the weaker quarter, Hooker still has $28.3 million available on its credit line, along with $29 million in life insurance cash value.
Overall, it was a tough quarter, and the numbers reflect the challenges Hooker Furnishings is facing. With consumer demand still sluggish, the company is relying on restructuring and cost-cutting efforts to navigate through this period and hopefully set itself up for better performance down the line.
Financial Health and Stability
A company’s ability to pay consistent dividends depends on its financial strength. Here’s how Hooker Furnishings stacks up.
Profitability and Earnings
- Revenue: $389.78 million (Down 10.7% year over year)
- Net Income: -$9.76 million (Losses instead of profits)
- Operating Margin: -5.09% (Negative, showing operational struggles)
Revenue is shrinking, and losses are mounting. These aren’t characteristics of a strong dividend stock, as companies in this position often look to cut expenses—including dividend payouts—to stabilize finances.
Debt and Liquidity
- Total Debt: $72.34 million
- Debt-to-Equity Ratio: 34.65% (Moderate, but worth monitoring)
- Current Ratio: 3.15 (Healthy short-term liquidity)
The company has enough cash and liquidity to meet its immediate financial obligations, but the combination of declining revenue and continued dividend payments could strain resources over time.
Valuation and Stock Performance
Is HOFT Undervalued?
- Price-to-Book Ratio: 0.63 (Trading below book value, suggesting it could be undervalued)
- Forward P/E Ratio: 9.37 (Reasonable, but reliant on future earnings recovery)
- PEG Ratio: 0.67 (Suggests undervaluation relative to projected growth)
On paper, HOFT looks inexpensive compared to its fundamentals. But valuation metrics only tell part of the story—if earnings don’t recover, even a “cheap” stock can continue to fall.
Stock Performance
- 52-Week High: $24.18
- 52-Week Low: $12.06
- Current Price: $12.88
- 50-Day Moving Average: $13.14
- 200-Day Moving Average: $15.36
The stock has nearly been cut in half over the past year, reflecting a lack of investor confidence. While value investors might see an opportunity, the downward trend is a warning sign for those looking for a stable income stock.
Risks and Considerations
🔴 A 650% payout ratio means the dividend isn’t supported by earnings, raising the risk of a cut.
🔴 Revenue and profits are declining, making it difficult to sustain payouts.
🔴 The stock is in a clear downtrend, and without a turnaround, further declines are possible.
🟢 The company has manageable debt and decent short-term liquidity.
🟢 If earnings recover, the current valuation could make the stock an attractive turnaround play.
Investors should weigh these factors carefully. A high yield is only valuable if it’s sustainable, and right now, HOFT’s ability to maintain its dividend is questionable.
Final Thoughts
Hooker Furnishings presents an interesting case for dividend investors. The high yield is appealing, but the company’s financial struggles cast doubt on whether it can maintain its current payout. A 650% payout ratio is a glaring red flag, and with net losses piling up, a dividend cut could be on the horizon.
For those willing to take a gamble on a turnaround, the stock’s low valuation may seem tempting. But for investors who prioritize steady and reliable dividend income, the risks appear to outweigh the rewards.
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