Be Sure To Check Out Precision Wires India Ltd. (NSE:PRECWIRE) Before It Goes Ex-Dividend

Readers hoping to buy Precision Wires India Ltd. (NSE:PRECWIRE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 23rd of February will not receive this dividend, which will be paid on the 12th of March.

Precision Wires India's next dividend payment will be ₹2.00 per share, and in the last 12 months, the company paid a total of ₹4.00 per share. Based on the last year's worth of payments, Precision Wires India stock has a trailing yield of around 2.3% on the current share price of ₹179.2. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Precision Wires India has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Precision Wires India

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Precision Wires India is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Precision Wires India generated enough free cash flow to afford its dividend. Luckily it paid out just 16% of its free cash flow last year.

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 Precision Wires India 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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Precision Wires India has grown its earnings rapidly, up 24% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Precision Wires India looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Precision Wires India has delivered an average of 6.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Precision Wires India got what it takes to maintain its dividend payments? It's great that Precision Wires India is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Precision Wires India, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Precision Wires India is facing. For example - Precision Wires India has 3 warning signs we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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