Prakash Pipes' (NSE:PPL) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Prakash Pipes Limited (NSE:PPL) has announced that it will be paying its dividend of ₹2.40 on the 30th of October, an increased payment from last year's comparable dividend. This makes the dividend yield 0.7%, which is above the industry average.

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Prakash Pipes' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Prakash Pipes was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 17.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.0% by next year, which is in a pretty sustainable range.

View our latest analysis for Prakash Pipes

Prakash Pipes Doesn't Have A Long Payment History

It is great to see that Prakash Pipes has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 6 years was ₹1.20 in 2019, and the most recent fiscal year payment was ₹2.40. This means that it has been growing its distributions at 12% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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. Prakash Pipes has impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Prakash Pipes' prospects of growing its dividend payments in the future.

We Really Like Prakash Pipes' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Prakash Pipes that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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