Himadri Speciality Chemical (NSE:HSCL) Has Affirmed Its Dividend Of ₹0.15

Himadri Speciality Chemical Limited's (NSE:HSCL) investors are due to receive a payment of ₹0.15 per share on 29th of October. Including this payment, the dividend yield on the stock will be 0.3%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Himadri Speciality Chemical

Himadri Speciality Chemical's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Himadri Speciality Chemical was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 18.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 12%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from ₹0.10 in 2011 to the most recent annual payment of ₹0.15. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

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. Himadri Speciality Chemical's earnings per share has shrunk at 19% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Himadri Speciality Chemical's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Himadri Speciality Chemical (2 are potentially serious!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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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