PNC Infratech (NSE:PNCINFRA) Has Affirmed Its Dividend Of ₹0.50

The board of PNC Infratech Limited (NSE:PNCINFRA) has announced that it will pay a dividend on the 29th of October, with investors receiving ₹0.50 per share. This payment means the dividend yield will be 0.2%, which is below the average for the industry.

Check out our latest analysis for PNC Infratech

PNC Infratech's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, PNC Infratech's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 19.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 2.2%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

PNC Infratech Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of ₹0.30 in 2015 to the most recent total annual payment of ₹0.50. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider PNC Infratech to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. PNC Infratech has impressed us by growing EPS at 43% 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.

Our Thoughts On PNC Infratech's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about PNC Infratech's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for PNC Infratech that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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