PSP Projects Limited (NSE:PSPPROJECT) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase PSP Projects' shares on or after the 8th of September, you won't be eligible to receive the dividend, when it is paid on the 18th of October.
The company's next dividend payment will be ₹4.00 per share, and in the last 12 months, the company paid a total of ₹4.00 per share. Last year's total dividend payments show that PSP Projects has a trailing yield of 1.0% on the current share price of ₹449.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. PSP Projects paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see PSP Projects has grown its earnings rapidly, up 31% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. PSP Projects has delivered 12% dividend growth per year on average over the past four years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is PSP Projects worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, PSP Projects appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while PSP Projects has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for PSP Projects and you should be aware of it before buying any shares.
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. 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.
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