Housing and Urban Development Corporation Limited (NSE:HUDCO) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

By
Simply Wall St
Published
September 11, 2021
NSEI:HUDCO
Source: Shutterstock

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Housing and Urban Development Corporation Limited (NSE:HUDCO) is about to go ex-dividend in just 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Housing and Urban Development's shares on or after the 16th of September will not receive the dividend, which will be paid on the 30th of October.

The company's next dividend payment will be ₹1.43 per share, on the back of last year when the company paid a total of ₹2.18 to shareholders. Last year's total dividend payments show that Housing and Urban Development has a trailing yield of 5.1% on the current share price of ₹43.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Housing and Urban Development

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Housing and Urban Development paid out just 24% 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 Housing and Urban Development paid out over the last 12 months.

historic-dividend
NSEI:HUDCO Historic Dividend September 12th 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Housing and Urban Development's earnings per share have risen 18% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Housing and Urban Development has delivered 157% dividend growth per year on average over the past four years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Housing and Urban Development? Companies like Housing and Urban Development that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Housing and Urban Development ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Housing and Urban Development for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Housing and Urban Development (1 is significant!) that deserve your attention before investing in the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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