Punjab National Bank (NSE:PNB) Is Increasing Its Dividend To ₹0.65

Punjab National Bank (NSE:PNB) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of July to ₹0.65. This makes the dividend yield about the same as the industry average at 1.3%.

Check out our latest analysis for Punjab National Bank

Punjab National Bank's Dividend Forecasted To Be Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having distributed dividends for at least 10 years, Punjab National Bank has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 18% also shows that Punjab National Bank is able to comfortably pay dividends.

If the trend of the last few years continues, EPS will grow by 104.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 10% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹4.40, compared to the most recent full-year payment of ₹0.65. This works out to a decline of approximately 85% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Punjab National Bank has been growing its earnings per share at 104% 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 Punjab National Bank's Dividend

Overall, a dividend increase is always good, and we think that Punjab National Bank is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Punjab National Bank (1 doesn't sit too well with us!) that you should be aware of before investing. Is Punjab National Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.