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Dividend paying stocks like Hindustan Media Ventures Limited (NSE:HMVL) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.
Investors might not know much about Hindustan Media Ventures's dividend prospects, even though it has been paying dividends for the last eight years and offers a 1.7% yield. A 1.7% yield is not inspiring, but the longer payment history has some appeal. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
Explore this interactive chart for our latest analysis on Hindustan Media Ventures!
Payout ratios
Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 12% of Hindustan Media Ventures's profits were paid out as dividends in the last 12 months. We'd say its dividends are thoroughly covered by earnings.
Another important check we do is to see if the free cash flow generated is sufficient to pay the dividend. Last year, Hindustan Media Ventures paid a dividend while reporting negative free cash flow. While there may be an explanation, we think this behaviour is generally not sustainable.
With a strong net cash balance, Hindustan Media Ventures investors may not have much to worry about in the near term from a dividend perspective.
We update our data on Hindustan Media Ventures every 24 hours, so you can always get our latest analysis of its financial health, here.
Dividend Volatility
From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. The first recorded dividend for Hindustan Media Ventures, in the last decade, was eight years ago. The dividend has been quite stable over the past eight years, which is great to see - although we usually like to see the dividend maintained for a decade before giving it full marks, though. During the past eight-year period, the first annual payment was ₹1.00 in 2011, compared to ₹1.20 last year. Dividends per share have grown at approximately 2.3% per year over this time.