HICL Infrastructure (LON:HICL) Is Increasing Its Dividend To £0.0209

HICL Infrastructure PLC (LON:HICL) has announced that it will be increasing its periodic dividend on the 31st of December to £0.0209, which will be 1.5% higher than last year's comparable payment amount of £0.0206. This will take the annual payment to 7.5% of the stock price, which is above what most companies in the industry pay.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

HICL Infrastructure's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

If the company can't turn things around, EPS could fall by 2.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 360%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for HICL Infrastructure

HICL Infrastructure Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from £0.0724 total annually to £0.0825. This works out to be a compound annual growth rate (CAGR) of approximately 1.3% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, HICL Infrastructure's earnings per share has shrunk at approximately 2.6% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for HICL Infrastructure that you should be aware of before investing. Is HICL Infrastructure not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.