Punjab National Bank's (NSE:PNB) Dividend Will Be Increased To ₹1.50

Punjab National Bank's (NSE:PNB) dividend will be increasing from last year's payment of the same period to ₹1.50 on 29th of July. The payment will take the dividend yield to 1.2%, which is in line with the average for the industry.

View our latest analysis for Punjab National Bank

Punjab National Bank's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Punjab National Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Punjab National Bank's latest earnings report puts its payout ratio at 18%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to expand by 91.0%. The future payout ratio could be 20% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹4.00 in 2014 to the most recent total annual payment of ₹1.50. The dividend has shrunk at around 9.3% a year during that period. 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.

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. We are encouraged to see that Punjab National Bank has grown earnings per share at 77% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Punjab National Bank Looks Like A Great Dividend Stock

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 of these factors considered, we think this has solid potential as a dividend 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 picked out 1 warning sign for Punjab National Bank that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection 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.