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Attention dividend hunters! Hindustan Aeronautics Limited (NSE:HAL) will be distributing its dividend of ₹19.80 per share on the 17 April 2019, and will start trading ex-dividend in 4 days time on the 28 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Hindustan Aeronautics’s latest financial data to analyse its dividend attributes.
See our latest analysis for Hindustan Aeronautics
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5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has the amount of dividend per share grown over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How well does Hindustan Aeronautics fit our criteria?
The current trailing twelve-month payout ratio for the stock is 14%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Hindustan Aeronautics as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether HAL one as a stable dividend player.
Relative to peers, Hindustan Aeronautics generates a yield of 2.8%, which is high for Aerospace & Defense stocks.
Next Steps:
Taking all the above into account, Hindustan Aeronautics is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental aspects you should look at: