Himadri Speciality Chemical (NSE:HSCL) Is Increasing Its Dividend To ₹0.20

Himadri Speciality Chemical Limited (NSE:HSCL) will increase its dividend from last year's comparable payment on the 28th of October to ₹0.20. This takes the annual payment to 0.2% of the current stock price, which unfortunately is below what the industry is paying.

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 Himadri Speciality Chemical's stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Himadri Speciality Chemical

Himadri Speciality Chemical's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Himadri Speciality Chemical's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 4.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 16%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹0.10 in 2012, and the most recent fiscal year payment was ₹0.20. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

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. Over the past five years, it looks as though Himadri Speciality Chemical's EPS has declined at around 4.8% a year. 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Himadri Speciality Chemical 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Himadri Speciality Chemical (of which 1 can't be ignored!) you should know about. Is Himadri Speciality Chemical not quite the opportunity you were looking for? Why not check out our selection of top 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.