Hindustan Copper (NSE:HINDCOPPER) Could Be A Buy For Its Upcoming Dividend
Hindustan Copper Limited (NSE:HINDCOPPER) stock is about to trade ex-dividend in three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Hindustan Copper's shares on or after the 18th of September, you won't be eligible to receive the dividend, when it is paid on the 25th of October.
The company's next dividend payment will be ₹1.46 per share. Last year, in total, the company distributed ₹1.46 to shareholders. Last year's total dividend payments show that Hindustan Copper has a trailing yield of 0.5% on the current share price of ₹280.05. If you buy this business for its dividend, you should have an idea of whether Hindustan Copper's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Hindustan Copper paid out a comfortable 30% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 72% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Hindustan Copper
Click here to see how much of its profit Hindustan Copper paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Hindustan Copper has grown its earnings rapidly, up 46% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hindustan Copper has delivered 3.9% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Hindustan Copper is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy Hindustan Copper for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Hindustan Copper paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Hindustan Copper, and we would prioritise taking a closer look at it.
So while Hindustan Copper looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Hindustan Copper you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.