Hexaware Technologies Limited (NSE:HEXAWARE) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 21st of August in order to receive the dividend, which the company will pay on the 27th of August.
Hexaware Technologies's next dividend payment will be ₹1.50 per share, on the back of last year when the company paid a total of ₹10.00 to shareholders. Based on the last year's worth of payments, Hexaware Technologies stock has a trailing yield of around 2.6% on the current share price of ₹387.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Hexaware Technologies has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hexaware Technologies paid out a comfortable 46% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Hexaware Technologies'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.
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. With that in mind, we're encouraged by the steady growth at Hexaware Technologies, with earnings per share up 9.2% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hexaware Technologies has delivered an average of 35% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Is Hexaware Technologies an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest, and it's interesting that Hexaware Technologies is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. All things considered, we are not particularly enthused about Hexaware Technologies from a dividend perspective.
Curious what other investors think of Hexaware Technologies? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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