Only Three Days Left To Cash In On Hisar Metal Industries' (NSE:HISARMETAL) Dividend
Hisar Metal Industries Limited (NSE:HISARMETAL) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Hisar Metal Industries' shares before the 17th of August in order to receive the dividend, which the company will pay on the 27th of September.
The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Based on the last year's worth of payments, Hisar Metal Industries has a trailing yield of 0.7% on the current stock price of ₹149.40. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hisar Metal Industries paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Hisar Metal Industries generated enough free cash flow to afford its dividend. It paid out 8.9% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Hisar Metal Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for Hisar Metal Industries
Click here to see how much of its profit Hisar Metal Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Hisar Metal Industries's earnings per share have been shrinking at 2.5% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Hisar Metal Industries has increased its dividend at approximately 4.1% a year on average.
To Sum It Up
Has Hisar Metal Industries got what it takes to maintain its dividend payments? Hisar Metal Industries has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about Hisar Metal Industries from a dividend perspective.
While it's tempting to invest in Hisar Metal Industries for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Hisar Metal Industries that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking 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.