The board of PTL Enterprises Limited (NSE:PTL) has announced that it will pay a dividend on the 23rd of August, with investors receiving ₹1.75 per share. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.
See our latest analysis for PTL Enterprises
PTL Enterprises Is Paying Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 98% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
If the company can't turn things around, EPS could fall by 10.0% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 123%, which is definitely a bit high to be sustainable going forward.
PTL Enterprises Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹1.75. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth Is Doubtful
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. PTL Enterprises has seen earnings per share falling at 10.0% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think PTL Enterprises is a great stock to add to your portfolio if income is your focus.
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. Case in point: We've spotted 3 warning signs for PTL Enterprises (of which 2 are a bit concerning!) you should know about. 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.
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About NSEI:PTL
PTL Enterprises
PTL Enterprises Limited leases of plant to Apollo Tyres Limited.
Established dividend payer with proven track record.
