Precision Camshafts (NSE:PRECAM) Has Announced A Dividend Of ₹1.00

The board of Precision Camshafts Limited (NSE:PRECAM) has announced that it will pay a dividend on the 25th of August, with investors receiving ₹1.00 per share. The dividend yield is 0.5% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Precision Camshafts

Precision Camshafts' Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Precision Camshafts' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 26.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

Precision Camshafts Is Still Building Its Track Record

It is great to see that Precision Camshafts has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The payments haven't really changed that much since 8 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Precision Camshafts has grown earnings per share at 26% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Precision Camshafts' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Precision Camshafts that investors should take into consideration. Is Precision Camshafts not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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