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Hinduja Global Solutions Limited (NSE:HGS) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 13th of August will not receive the dividend, which will be paid on the 27th of August.
Hinduja Global Solutions's next dividend payment will be ₹2.50 per share. Last year, in total, the company distributed ₹10.00 to shareholders. Last year's total dividend payments show that Hinduja Global Solutions has a trailing yield of 1.8% on the current share price of ₹567.4. If you buy this business for its dividend, you should have an idea of whether Hinduja Global Solutions's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Hinduja Global Solutions
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. Hinduja Global Solutions paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Hinduja Global Solutions's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hinduja Global Solutions's dividend payments per share have declined at 4.0% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Is Hinduja Global Solutions an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Hinduja Global Solutions is halfway there. Hinduja Global Solutions looks solid on this analysis overall, and we'd definitely consider investigating it more closely.