HeidelbergCement India (NSE:HEIDELBERG) Has Announced That It Will Be Increasing Its Dividend To ₹8.00

The board of HeidelbergCement India Limited (NSE:HEIDELBERG) has announced that it will be paying its dividend of ₹8.00 on the 25th of October, an increased payment from last year's comparable dividend. This makes the dividend yield 3.4%, which is above the industry average.

View our latest analysis for HeidelbergCement India

HeidelbergCement India's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, HeidelbergCement India's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

The next year is set to see EPS grow by 90.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

HeidelbergCement India's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was ₹2.00 in 2017, and the most recent fiscal year payment was ₹8.00. This means that it has been growing its distributions at 22% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. HeidelbergCement India has seen earnings per share falling at 5.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

HeidelbergCement India's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think HeidelbergCement India will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 1 warning sign for HeidelbergCement India that investors need to be conscious of moving forward. Is HeidelbergCement India not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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