There's A Lot To Like About HPL Electric & Power's (NSE:HPL) Upcoming ₹1.00 Dividend
HPL Electric & Power Limited (NSE:HPL) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase HPL Electric & Power's shares on or after the 17th of September, you won't be eligible to receive the dividend, when it is paid on the 24th of October.
The company's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹1.00 per share. Last year's total dividend payments show that HPL Electric & Power has a trailing yield of 0.3% on the current share price of ₹292.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. HPL Electric & Power paid out just 7.1% 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 HPL Electric & Power generated enough free cash flow to afford its dividend. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for HPL Electric & Power
Click here to see how much of its profit HPL Electric & Power paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see HPL Electric & Power's earnings have been skyrocketing, up 56% per annum for the past five years. HPL Electric & Power is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. HPL Electric & Power has seen its dividend decline 4.4% per annum on average over the past nine years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Has HPL Electric & Power got what it takes to maintain its dividend payments? It's great that HPL Electric & Power is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. HPL Electric & Power looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks HPL Electric & Power is facing. For instance, we've identified 2 warning signs for HPL Electric & Power (1 doesn't sit too well with us) you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.