Here's What We Like About Hyundai Motor India's (NSE:HYUNDAI) Upcoming Dividend
Readers hoping to buy Hyundai Motor India Limited (NSE:HYUNDAI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Hyundai Motor India's shares on or after the 5th of August will not receive the dividend, which will be paid on the 25th of September.
The company's next dividend payment will be ₹21.00 per share, on the back of last year when the company paid a total of ₹21.00 to shareholders. Based on the last year's worth of payments, Hyundai Motor India stock has a trailing yield of around 1.0% on the current share price of ₹2180.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Hyundai Motor India's payout ratio is modest, at just 31% of profit. A useful secondary check can be to evaluate whether Hyundai Motor India generated enough free cash flow to afford its dividend. Over the last year it paid out 56% 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.
See our latest analysis for Hyundai Motor India
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 Hyundai Motor India has grown its earnings rapidly, up 21% a year for the past five years.
Unfortunately Hyundai Motor India has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
The Bottom Line
Is Hyundai Motor India an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Hyundai Motor India paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
Ever wonder what the future holds for Hyundai Motor India? See what the 25 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.