Why You Might Be Interested In Bharti Hexacom Limited (NSE:BHARTIHEXA) For Its Upcoming Dividend
It looks like Bharti Hexacom Limited (NSE:BHARTIHEXA) is about to go ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Bharti Hexacom's shares on or after the 31st of July will not receive the dividend, which will be paid on the 10th of September.
The company's next dividend payment will be ₹18.00 per share, on the back of last year when the company paid a total of ₹18.00 to shareholders. Calculating the last year's worth of payments shows that Bharti Hexacom has a trailing yield of 1.1% on the current share price of ₹1607.60. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Bharti Hexacom is paying out an acceptable 52% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.
It's positive to see that Bharti Hexacom's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Bharti Hexacom
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Bharti Hexacom's earnings have been skyrocketing, up 27% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Bharti Hexacom could have strong prospects for future increases to the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past two years, Bharti Hexacom has increased its dividend at approximately 112% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Bharti Hexacom an attractive dividend stock, or better left on the shelf? We like Bharti Hexacom's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
Ever wonder what the future holds for Bharti Hexacom? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.