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Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that PTL Enterprises Limited (NSE:PTL) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 17th of July to receive the dividend, which will be paid on the 29th of August.
Enterprises’s next dividend payment will be ₹2.50 per share, and in the last 12 months, the company paid a total of ₹2.50 per share. Based on the last year’s worth of payments, Enterprises has a trailing yield of 6.0% on the current stock price of ₹41.7. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Enterprises has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That’s why it’s good to see Enterprises paying out a modest 42% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 34% of its free cash flow in the past 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.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we’re glad to see Enterprises’s earnings per share have risen 10% per annum over the last five years.
The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination – plus the dividend can always be increased later.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Enterprises has delivered an average of 20% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is Enterprises worth buying for its dividend? Enterprises has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There’s a lot to like about Enterprises, and we would prioritise taking a closer look at it.
Want to learn more about Enterprises’s dividend performance? Check out this visualisation of its historical revenue and earnings growth.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.