Himadri Speciality Chemical Limited (NSE:HSCL) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Himadri Speciality Chemical Limited (NSE:HSCL) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is two business days 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. Thus, you can purchase Himadri Speciality Chemical's shares before the 23rd of May in order to receive the dividend, which the company will pay on the 12th of July.

The company's next dividend payment will be ₹0.60 per share, and in the last 12 months, the company paid a total of ₹0.60 per share. Based on the last year's worth of payments, Himadri Speciality Chemical stock has a trailing yield of around 0.1% on the current share price of ₹463.20. 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! We need to see whether the dividend is covered by earnings and if it's growing.

We check all companies for important risks. See what we found for Himadri Speciality Chemical in our free report.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Himadri Speciality Chemical is paying out just 5.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 8.9% of its cash flow last year.

It's positive to see that Himadri Speciality Chemical'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.

View our latest analysis for Himadri Speciality Chemical

Click here to see how much of its profit Himadri Speciality Chemical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Himadri Speciality Chemical's earnings per share have been growing at 18% a year for the past 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Himadri Speciality Chemical has delivered an average of 20% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Himadri Speciality Chemical an attractive dividend stock, or better left on the shelf? Himadri Speciality Chemical has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Himadri Speciality Chemical, and we would prioritise taking a closer look at it.

Want to learn more about Himadri Speciality Chemical's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.