Hindustan Composites' (NSE:HINDCOMPOS) Dividend Will Be ₹2.00

Hindustan Composites Limited (NSE:HINDCOMPOS) has announced that it will pay a dividend of ₹2.00 per share on the 6th of October. Including this payment, the dividend yield on the stock will be 0.4%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Hindustan Composites' stock price has increased by 43% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Hindustan Composites

Hindustan Composites' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Hindustan Composites' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 3.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Hindustan Composites Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹0.333 in 2013, and the most recent fiscal year payment was ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Hindustan Composites May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Hindustan Composites has only grown its earnings per share at 3.7% per annum over the past five years. While EPS growth is quite low, Hindustan Composites has the option to increase the payout ratio to return more cash to shareholders.

Hindustan Composites Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Hindustan Composites that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated 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.