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Hatsun Agro Product Limited (NSE:HATSUNPP) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 25th of July will not receive this dividend, which will be paid on the 16th of August.

Hatsun Agro Product's upcoming dividend is ₹1.60 a share, following on from the last 12 months, when the company distributed a total of ₹4.00 per share to shareholders. Based on the last year's worth of payments, Hatsun Agro Product stock has a trailing yield of around 0.6% on the current share price of ₹600. If you buy this business for its dividend, you should have an idea of whether Hatsun Agro Product's dividend is reliable and sustainable. As a result, readers should always check whether Hatsun Agro Product has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Hatsun Agro Product

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. Hatsun Agro Product paid out 51% of its earnings to investors last year, a normal payout level for most businesses. Hatsun Agro Product paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Hatsun Agro Product earnings per share are up 7.9% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 7 years, Hatsun Agro Product has lifted its dividend by approximately 34% a year on average. 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid Hatsun Agro Product? Earnings per share growth has been modest and Hatsun Agro Product paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, it's hard to get excited about Hatsun Agro Product from a dividend perspective.

Ever wonder what the future holds for Hatsun Agro Product? See what the three analysts we track 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.