Stock Analysis

Pental's (ASX:PTL) Upcoming Dividend Will Be Larger Than Last Year's

ASX:PTL
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Pental Limited (ASX:PTL) will increase its dividend on the 24th of September to AU$0.016. This makes the dividend yield 5.8%, which is above the industry average.

Check out our latest analysis for Pental

Pental's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Pental's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 0.9% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 61%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

historic-dividend
ASX:PTL Historic Dividend August 25th 2021

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was AU$0.60 in 2011, and the most recent fiscal year payment was AU$0.022. This works out to a decline of approximately 96% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Pental May Find It Hard To Grow The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Unfortunately, Pental's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Pental's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Pental that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of 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.
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