Hisar Metal Industries Limited (NSE:HISARMETAL) Looks Interesting, And It's About To Pay A Dividend

Hisar Metal Industries Limited (NSE:HISARMETAL) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Hisar Metal Industries' shares on or after the 11th of September will not receive the dividend, which will be paid on the 22nd of October.

The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Looking at the last 12 months of distributions, Hisar Metal Industries has a trailing yield of approximately 0.6% on its current stock price of ₹175.1. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! 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 Hisar Metal Industries

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. Hisar Metal Industries has a low and conservative payout ratio of just 4.9% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 7.2% of its cash flow last year.

It's positive to see that Hisar Metal Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Hisar Metal Industries 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Hisar Metal Industries's earnings per share have risen 12% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Hisar Metal Industries has increased its dividend at approximately 4.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Hisar Metal Industries is keeping back more of its profits to grow the business.

Final Takeaway

Is Hisar Metal Industries an attractive dividend stock, or better left on the shelf? Hisar Metal Industries has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Hisar Metal Industries looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Hisar Metal Industries for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 4 warning signs for Hisar Metal Industries that we strongly recommend you have a look at before investing in the company.

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.