Stock Analysis

Indian Hume Pipe (NSE:INDIANHUME) Will Pay A Dividend Of ₹2.00

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The board of The Indian Hume Pipe Company Limited (NSE:INDIANHUME) has announced that it will pay a dividend on the 25th of September, with investors receiving ₹2.00 per share. Including this payment, the dividend yield on the stock will be 0.9%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Indian Hume Pipe

Indian Hume Pipe's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Indian Hume Pipe's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 7.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

NSEI:INDIANHUME Historic Dividend June 18th 2021

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from ₹1.00 in 2011 to the most recent annual payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Indian Hume Pipe might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Indian Hume Pipe has grown earnings per share at 7.6% per year over the past five years. Indian Hume Pipe definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Indian Hume Pipe's Dividend

Overall, a consistent dividend is a good thing, and we think that Indian Hume Pipe has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Indian Hume Pipe has 4 warning signs (and 2 which make us uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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