Be Sure To Check Out Hind Rectifiers Limited (NSE:HIRECT) Before It Goes Ex-Dividend

It looks like Hind Rectifiers Limited (NSE:HIRECT) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Meaning, you will need to purchase Hind Rectifiers' shares before the 22nd of July to receive the dividend, which will be paid on the 28th of August.

The company's next dividend payment will be ₹2.00 per share. Last year, in total, the company distributed ₹2.00 to shareholders. Calculating the last year's worth of payments shows that Hind Rectifiers has a trailing yield of 0.2% on the current share price of ₹1314.90. 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! As a result, readers should always check whether Hind Rectifiers has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hind Rectifiers is paying out just 9.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 16% of its free cash flow in the last year.

It's positive to see that Hind Rectifiers's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Hind Rectifiers

Click here to see how much of its profit Hind Rectifiers 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Hind Rectifiers's earnings per share have been growing at 14% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Hind Rectifiers has lifted its dividend by approximately 26% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Hind Rectifiers an attractive dividend stock, or better left on the shelf? It's great that Hind Rectifiers 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. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Hind Rectifiers you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.