HCL Technologies' (NSE:HCLTECH) Dividend Will Be $12.00

Simply Wall St · 10/17 00:05

HCL Technologies Limited (NSE:HCLTECH) has announced that it will pay a dividend of $12.00 per share on the 13th of November. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.

View our latest analysis for HCL Technologies

Estimates Indicate HCL Technologies' Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, HCL Technologies' dividend made up quite a large proportion of earnings but only 70% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 32.1%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

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NSEI:HCLTECH Historic Dividend October 17th 2024

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.0474 in 2014, and the most recent fiscal year payment was $0.618. This means that it has been growing its distributions at 29% per annum over that time. HCL Technologies has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that HCL Technologies has grown earnings per share at 7.1% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On HCL Technologies' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 picked out 2 warning signs for HCL Technologies that investors should know about before committing capital to this stock. Is HCL Technologies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.