Hindustan Aeronautics (NSE:HAL) Is Increasing Its Dividend To ₹25.00

Hindustan Aeronautics Limited (NSE:HAL) has announced that it will be increasing its periodic dividend on the 14th of March to ₹25.00, which will be 14% higher than last year's comparable payment amount of ₹22.00. This takes the annual payment to 1.0% of the current stock price, which is about average for the industry.

See our latest analysis for Hindustan Aeronautics

Hindustan Aeronautics' Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Hindustan Aeronautics' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 21.3%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Hindustan Aeronautics' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was ₹4.13, compared to the most recent full-year payment of ₹35.00. This means that it has been growing its distributions at 36% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Hindustan Aeronautics has seen EPS rising for the last five years, at 28% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Hindustan Aeronautics' Dividend

Overall, a dividend increase is always good, and we think that Hindustan Aeronautics is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign for Hindustan Aeronautics that investors should take into consideration. 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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