Precision Wires India's (NSE:PRECWIRE) Dividend Will Be Reduced To ₹0.36

Precision Wires India Limited (NSE:PRECWIRE) is reducing its dividend from last year's comparable payment to ₹0.36 on the 4th of October. The dividend yield of 1.0% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for Precision Wires India

Precision Wires India's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Precision Wires India's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 8.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% 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. Since 2013, the annual payment back then was ₹0.247, compared to the most recent full-year payment of ₹0.86. This means that it has been growing its distributions at 13% per annum over that time. Precision Wires India has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Precision Wires India has seen EPS rising for the last five years, at 8.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Precision Wires India's prospects of growing its dividend payments in the future.

We Really Like Precision Wires India's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Precision Wires India does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Precision Wires India 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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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.