Precision Camshafts (NSE:PRECAM) Is Due To Pay A Dividend Of ₹1.00

Precision Camshafts Limited's (NSE:PRECAM) investors are due to receive a payment of ₹1.00 per share on 25th of August. This means that the annual payment will be 0.5% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Precision Camshafts

Precision Camshafts' Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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 30.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

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. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Precision Camshafts has been growing its earnings per share at 31% a 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. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Precision Camshafts that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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