HeidelbergCement India Limited (NSE:HEIDELBERG) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy HeidelbergCement India Limited (NSE:HEIDELBERG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase HeidelbergCement India's shares on or after the 17th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of October.

The company's next dividend payment will be ₹8.00 per share, and in the last 12 months, the company paid a total of ₹8.00 per share. Based on the last year's worth of payments, HeidelbergCement India stock has a trailing yield of around 3.1% on the current share price of ₹261.5. If you buy this business for its dividend, you should have an idea of whether HeidelbergCement India's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for HeidelbergCement India

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. HeidelbergCement India paid out 54% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether HeidelbergCement India generated enough free cash flow to afford its dividend. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit HeidelbergCement India 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see HeidelbergCement India has grown its earnings rapidly, up 57% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. HeidelbergCement India has delivered 41% dividend growth per year on average over the past four years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has HeidelbergCement India got what it takes to maintain its dividend payments? HeidelbergCement India's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about HeidelbergCement India, and we would prioritise taking a closer look at it.

While it's tempting to invest in HeidelbergCement India for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for HeidelbergCement India you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.
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