Why You Might Be Interested In PIX Transmissions Limited (NSE:PIXTRANS) For Its Upcoming Dividend

It looks like PIX Transmissions Limited (NSE:PIXTRANS) is about to go ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase PIX Transmissions' shares before the 18th of July to receive the dividend, which will be paid on the 25th of August.

The company's next dividend payment will be ₹9.00 per share, on the back of last year when the company paid a total of ₹9.00 to shareholders. Based on the last year's worth of payments, PIX Transmissions has a trailing yield of 0.6% on the current stock price of ₹1542.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. PIX Transmissions has a low and conservative payout ratio of just 11% of its income after tax. A useful secondary check can be to evaluate whether PIX Transmissions generated enough free cash flow to afford its dividend. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for PIX Transmissions

Click here to see how much of its profit PIX Transmissions paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see PIX Transmissions has grown its earnings rapidly, up 30% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, PIX Transmissions looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, PIX Transmissions has lifted its dividend by approximately 25% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy PIX Transmissions for the upcoming dividend? PIX Transmissions has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. PIX Transmissions looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while PIX Transmissions looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for PIX Transmissions that you should be aware of before investing in their shares.

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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.