GIC Housing Finance Limited (NSE:GICHSGFIN) Looks Interesting, And It's About To Pay A Dividend

GIC Housing Finance Limited (NSE:GICHSGFIN) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase GIC Housing Finance's shares before the 25th of August to receive the dividend, which will be paid on the 26th of October.

The company's next dividend payment will be ₹4.50 per share, on the back of last year when the company paid a total of ₹4.50 to shareholders. Based on the last year's worth of payments, GIC Housing Finance stock has a trailing yield of around 2.5% on the current share price of ₹179.95. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether GIC Housing Finance has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for GIC Housing Finance

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. GIC Housing Finance paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit GIC Housing Finance paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that GIC Housing Finance's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. GIC Housing Finance has seen its dividend decline 1.0% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid GIC Housing Finance? Earnings per share have been flat in recent years, although GIC Housing Finance reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating GIC Housing Finance more closely.

In light of that, while GIC Housing Finance has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with GIC Housing Finance (at least 1 which is potentially serious), and understanding these should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.