Punjab National Bank's (NSE:PNB) Shareholders Will Receive A Bigger Dividend Than Last Year

Punjab National Bank (NSE:PNB) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of July to ₹0.65. This makes the dividend yield about the same as the industry average at 1.3%.

See our latest analysis for Punjab National Bank

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

We aren't too impressed by dividend yields unless they can be sustained over time.

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 21% also shows that Punjab National Bank is able to comfortably pay dividends.

Analysts expect a massive rise in earnings per share in the next 3 years. Additionally, they estimate future payout ratio will be 15% over the same time horizon, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. 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. Punjab National Bank has seen EPS rising for the last five years, at 104% per annum. 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.

Punjab National Bank Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Punjab National Bank you should be aware of, and 1 of them is a bit unpleasant. 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.