Honda India Power Products Limited (NSE: HONDAPOWER) looks like a good stock, and it will be ex-dividend soon
Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Honda India Power Products Limited (NSE: HONDAPOWER) is set to trade ex-dividend within the next 3 days. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for the payment of a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. In other words, investors can buy Honda India Power Products shares before September 13 in order to be eligible for the dividend, which will be paid on October 19.
The company’s next dividend payment will be 10.00 per share, and over the past 12 months, the company has paid a total of 10.00 per share. Based on the value of last year’s payouts, Honda India Power Products has a rolling 0.8% return on the current share price of 1206.3. Dividends are an important source of income for many shareholders, but the health of the business is crucial to sustaining these dividends. You have to see if the dividend is covered by profits and if it increases.
Check out our latest review for Honda India Power products
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Honda India Power Products has a low and conservative payout ratio of only 13% of its after-tax income. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. It paid 9.3% of its free cash flow in the form of dividends last year, which is conservative.
It is positive to see that the Honda India Power Products dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher. large safety margin before the dividend is cut.
Click here to see how much of its profit Honda India Power Products paid in the last 12 months.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. With that in mind, we are encouraged by the steady growth of Honda India Power Products, with earnings per share up 9.1% on average over the past five years. Earnings per share have grown at a decent rate and the company keeps more than three-quarters of its profits in the business. This is an interesting combination, because when profits are reinvested efficiently, growth can amplify, with corresponding benefits for profits and dividends in the future.
Most investors primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Honda India Power Products has generated an average annual increase of 2.9% per annum in its dividend, based on dividend payments over the past 10 years. We are happy to see dividends increasing alongside earnings over multiple years, which may be a sign that the company intends to share the growth with its shareholders.
Should investors buy Honda India Power Products for the next dividend? Earnings per share rose moderately and Honda India Power Products is paying less than half of its earnings and cash flow as dividends, which is an interesting combination as it suggests the company is investing in growth. It might be nice to see profits rise faster, but Honda India Power Products is careful with its dividend payouts and could still perform reasonably well in the long term. Overall, we think this is an attractive combination worthy of further research.
So while Honda India Power Products looks good from a dividend standpoint, it’s still worth being aware of the risks involved in this title. To this end, you should inquire about the 2 warning signs we have spotted Honda India Power products (including 1 which does not suit us too much).
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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