Praj Industries (NSE:PRAJIND) Will Pay A Larger Dividend Than Last Year At ₹4.20

The board of Praj Industries Limited (NSE:PRAJIND) has announced that it will be paying its dividend of ₹4.20 on the 31st of August, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 0.7% is only a modest boost to shareholder returns.

View our latest analysis for Praj Industries

Praj Industries' Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Praj Industries was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 110.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹1.62 in 2012, and the most recent fiscal year payment was ₹2.70. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Praj Industries has been growing its earnings per share at 27% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Praj Industries Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Praj Industries is a strong income stock thanks to its track record and growing earnings. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Praj Industries that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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