Pearl Global Industries Limited (NSE:PGIL) Passed Our Checks, And It's About To Pay A ₹6.50 Dividend

Pearl Global Industries Limited (NSE:PGIL) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Pearl Global Industries' shares before the 26th of May in order to be eligible for the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ₹6.50 per share, on the back of last year when the company paid a total of ₹5.00 to shareholders. Based on the last year's worth of payments, Pearl Global Industries stock has a trailing yield of around 0.4% on the current share price of ₹1301.30. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Pearl Global Industries can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Pearl Global Industries paid out just 9.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 44% 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.

Check out our latest analysis for Pearl Global Industries

Click here to see how much of its profit Pearl Global 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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Pearl Global Industries's earnings have been skyrocketing, up 61% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Pearl Global Industries has delivered 17% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Is Pearl Global Industries worth buying for its dividend? Pearl Global Industries has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Pearl Global Industries looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Pearl Global Industries has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Pearl Global Industries has 2 warning signs (and 1 which is potentially serious) we think you should know about.

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.