Prakash Pipes (NSE:PPL) Is Increasing Its Dividend To ₹1.80

Prakash Pipes Limited's (NSE:PPL) dividend will be increasing from last year's payment of the same period to ₹1.80 on 30th of October. This takes the annual payment to 0.3% of the current stock price, which unfortunately is below what the industry is paying.

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 Prakash Pipes' stock price has increased by 52% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Prakash Pipes

Prakash Pipes' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Prakash Pipes' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 24.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 3.8% by next year, which we think can be pretty sustainable going forward.

Prakash Pipes Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the annual payment back then was ₹1.20, compared to the most recent full-year payment of ₹1.80. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Prakash Pipes has grown earnings per share at 25% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Prakash Pipes Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Prakash Pipes is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For instance, we've picked out 1 warning sign for Prakash Pipes 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.