Is It Smart To Buy Prince Pipes and Fittings Limited (NSE:PRINCEPIPE) Before It Goes Ex-Dividend?

Readers hoping to buy Prince Pipes and Fittings Limited (NSE:PRINCEPIPE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Prince Pipes and Fittings' shares before the 4th of September in order to receive the dividend, which the company will pay on the 11th of October.

The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Looking at the last 12 months of distributions, Prince Pipes and Fittings has a trailing yield of approximately 0.2% on its current stock price of ₹587.05. If you buy this business for its dividend, you should have an idea of whether Prince Pipes and Fittings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Prince Pipes and Fittings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Prince Pipes and Fittings has a low and conservative payout ratio of just 6.1% of its income after tax. Prince Pipes and Fittings paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Prince Pipes and Fittings's earnings per share have been growing at 13% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Prince Pipes and Fittings dividends are largely the same as they were five years ago.

To Sum It Up

Is Prince Pipes and Fittings worth buying for its dividend? Companies like Prince Pipes and Fittings that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Prince Pipes and Fittings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Wondering what the future holds for Prince Pipes and Fittings? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.