Hindprakash Industries (NSE:HPIL) Is Paying Out A Dividend Of ₹1.00

The board of Hindprakash Industries Limited (NSE:HPIL) has announced that it will pay a dividend on the 27th of October, with investors receiving ₹1.00 per share. Based on this payment, the dividend yield on the company's stock will be 1.0%, which is an attractive boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Hindprakash Industries' stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Hindprakash Industries

Hindprakash Industries' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Hindprakash Industries was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 1.1% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 55%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Hindprakash Industries Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. There hasn't been much of a change in the dividend over the last 2 years. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Hindprakash Industries' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hindprakash Industries' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 3 warning signs for Hindprakash Industries that investors need to be conscious of moving forward. Is Hindprakash Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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