Prakash Pipes Limited (NSE:PPL) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Prakash Pipes Limited (NSE:PPL) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Prakash Pipes' shares before the 17th of September in order to receive the dividend, which the company will pay on the 30th of October.

The company's next dividend payment will be ₹1.80 per share, and in the last 12 months, the company paid a total of ₹1.80 per share. Last year's total dividend payments show that Prakash Pipes has a trailing yield of 0.3% on the current share price of ₹611.45. If you buy this business for its dividend, you should have an idea of whether Prakash Pipes's dividend is reliable and sustainable. As a result, readers should always check whether Prakash Pipes has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Prakash Pipes

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Prakash Pipes has a low and conservative payout ratio of just 4.8% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 2.9% 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.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Prakash Pipes's earnings have been skyrocketing, up 24% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Prakash Pipes looks like a promising growth company.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, Prakash Pipes has lifted its dividend by approximately 8.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Prakash Pipes for the upcoming dividend? Prakash Pipes has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Prakash Pipes has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Prakash Pipes that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.