It looks like HLE Glascoat Limited (NSE:HLEGLAS) 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 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. Meaning, you will need to purchase HLE Glascoat's shares before the 23rd of September to receive the dividend, which will be paid on the 30th of October.
The company's upcoming dividend is ₹1.10 a share, following on from the last 12 months, when the company distributed a total of ₹1.10 per share to shareholders. Based on the last year's worth of payments, HLE Glascoat has a trailing yield of 0.2% on the current stock price of ₹446.90. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether HLE Glascoat has been able to grow its dividends, or if the dividend might be cut.
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. HLE Glascoat paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 7.1% of its free cash flow in the last year.
It's positive to see that HLE Glascoat'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 HLE Glascoat
Click here to see how much of its profit HLE Glascoat paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see HLE Glascoat's earnings per share have dropped 8.6% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, HLE Glascoat has lifted its dividend by approximately 9.6% a year on average.
To Sum It Up
Is HLE Glascoat worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
In light of that, while HLE Glascoat has an appealing dividend, it's worth knowing the risks involved with this stock. For example, HLE Glascoat has 4 warning signs (and 3 which make us uncomfortable) we think you should know about.
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.