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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HICL Infrastructure PLC (LON:HICL) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase HICL Infrastructure's shares before the 22nd of May to receive the dividend, which will be paid on the 30th of June.
The company's upcoming dividend is UK£0.0207 a share, following on from the last 12 months, when the company distributed a total of UK£0.083 per share to shareholders. Based on the last year's worth of payments, HICL Infrastructure stock has a trailing yield of around 7.2% on the current share price of UK£1.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. HICL Infrastructure distributed an unsustainably high 162% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
See our latest analysis for HICL Infrastructure
Click here to see how much of its profit HICL Infrastructure paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by HICL Infrastructure's 20% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. HICL Infrastructure has delivered an average of 1.3% per year annual increase in its dividend, based on the past 10 years of dividend payments.