Read This Before Considering Page Industries Limited (NSE:PAGEIND) For Its Upcoming ₹150 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Page Industries Limited (NSE:PAGEIND) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 17th of February in order to be eligible for this dividend, which will be paid on the 11th of March.

Page Industries's next dividend payment will be ₹150 per share, and in the last 12 months, the company paid a total of ₹250 per share. Based on the last year's worth of payments, Page Industries stock has a trailing yield of around 0.8% on the current share price of ₹30692.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Page Industries

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. Last year Page Industries paid out 109% of its profits as dividends to shareholders, suggesting the dividend is not well covered by 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 41% of its free cash flow in the past year.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Page Industries fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see how much of its profit Page Industries paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Page Industries earnings per share are up 5.5% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Page Industries has increased its dividend at approximately 28% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Page Industries for the upcoming dividend? Earnings per share have grown modestly, and last year Page Industries paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Page Industries's dividend merits.

So if you want to do more digging on Page Industries, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 2 warning signs for Page Industries you should know about.

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.

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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. 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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