Hariom Pipe Industries (NSE:HARIOMPIPE) Will Pay A Larger Dividend Than Last Year At ₹0.61

Hariom Pipe Industries Limited (NSE:HARIOMPIPE) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of October to ₹0.61. This takes the annual payment to 0.1% of the current stock price, which unfortunately is below what the industry is paying.

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Hariom Pipe Industries' Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Hariom Pipe Industries was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 29.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 2.2%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Hariom Pipe Industries

Hariom Pipe Industries Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Hariom Pipe Industries has grown earnings per share at 30% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Hariom Pipe Industries' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Hariom Pipe Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Hariom Pipe Industries (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.