Pitti Engineering (NSE:PITTIENG) Has Affirmed Its Dividend Of ₹1.50

The board of Pitti Engineering Limited (NSE:PITTIENG) has announced that it will pay a dividend of ₹1.50 per share on the 26th of October. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.

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Pitti Engineering's Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. But before making this announcement, Pitti Engineering's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 83% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share is forecast to rise by 25.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.9% by next year, which is in a pretty sustainable range.

View our latest analysis for Pitti Engineering

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ₹0.50 total annually to ₹1.50. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Pitti Engineering has grown earnings per share at 107% per 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pitti Engineering's payments, as there could be some issues with sustaining them into the future. While Pitti Engineering is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Pitti Engineering that investors should take into consideration. 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.