Prakash Pipes (NSE:PPL) Will Pay A Dividend Of ₹1.20

The board of Prakash Pipes Limited (NSE:PPL) has announced that it will pay a dividend of ₹1.20 per share on the 28th of October. This payment means that the dividend yield will be 0.5%, which is around the industry average.

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 59% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Prakash Pipes

Prakash Pipes' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Prakash Pipes' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 14.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.9% by next year, which is in a pretty sustainable range.

Prakash Pipes Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. There hasn't been much of a change in the dividend over the last 4 years. Prakash Pipes hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

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 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Prakash Pipes' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 4 warning signs for Prakash Pipes that you should be aware of before investing. Is Prakash Pipes not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.