In This Article:
The board of HICL Infrastructure PLC (LON:HICL) has announced that it will pay a dividend of £0.0206 per share on the 31st of December. The dividend yield will be 6.8% based on this payment which is still above the industry average.
View our latest analysis for HICL Infrastructure
Estimates Indicate HICL Infrastructure's Could Struggle to Maintain Dividend Payments In The Future
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 550% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
If the company can't turn things around, EPS could fall by 37.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 885%, which could put the dividend under pressure if earnings don't start to improve.
HICL Infrastructure Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from £0.071 total annually to £0.0825. This means that it has been growing its distributions at 1.5% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 38% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
HICL Infrastructure's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for HICL Infrastructure that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.