Power & Instrumental (Gujarat) (NSE:PIGL) Will Pay A Dividend Of ₹0.20

The board of Power & Instrumental (Gujarat) Limited (NSE:PIGL) has announced that it will pay a dividend of ₹0.20 per share on the 30th of October. Including this payment, the dividend yield on the stock will be 0.1%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Power & Instrumental (Gujarat)'s stock price has increased by 107% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Power & Instrumental (Gujarat)

Power & Instrumental (Gujarat)'s Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Power & Instrumental (Gujarat) was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 3.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.6% by next year, which is in a pretty sustainable range.

Power & Instrumental (Gujarat) Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Power & Instrumental (Gujarat) May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 3.7% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Power & Instrumental (Gujarat)'s Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 example, we've identified 2 warning signs for Power & Instrumental (Gujarat) (1 doesn't sit too well with us!) that you should be aware of before investing. 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.