Hindustan Aeronautics' (NSE:HAL) Dividend Will Be ₹15.00

Hindustan Aeronautics Limited's (NSE:HAL) investors are due to receive a payment of ₹15.00 per share on 1st of January. This makes the dividend yield about the same as the industry average at 0.8%.

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Hindustan Aeronautics' Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Hindustan Aeronautics' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 41.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Hindustan Aeronautics

Hindustan Aeronautics' Dividend Has Lacked Consistency

It's comforting to see that Hindustan Aeronautics has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of ₹4.13 in 2018 to the most recent total annual payment of ₹38.00. This works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Hindustan Aeronautics has seen EPS rising for the last five years, at 24% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Hindustan Aeronautics' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Hindustan Aeronautics that you should be aware of before investing. Is Hindustan Aeronautics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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