Should Income Investors Look At PTC India Financial Services Limited (NSE:PFS) Before Its Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see PTC India Financial Services Limited (NSE:PFS) is about to trade ex-dividend in the next three days. You can purchase shares before the 14th of September in order to receive the dividend, which the company will pay on the 22nd of October.

India Financial Services's next dividend payment will be ₹0.45 per share. Last year, in total, the company distributed ₹0.45 to shareholders. Calculating the last year's worth of payments shows that India Financial Services has a trailing yield of 2.6% on the current share price of ₹17. If you buy this business for its dividend, you should have an idea of whether India Financial Services's dividend is reliable and sustainable. So we need to investigate whether India Financial Services can afford its dividend, and if the dividend could grow.

Check out our latest analysis for India Financial Services

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. India Financial Services is paying out just 24% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit India Financial Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. India Financial Services's earnings per share have fallen at approximately 8.0% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. India Financial Services has delivered 1.7% dividend growth per year on average over the past seven years.

The Bottom Line

Has India Financial Services got what it takes to maintain its dividend payments? India Financial Services's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It doesn't appear an outstanding opportunity, but could be worth a closer look.

With that being said, if dividends aren't your biggest concern with India Financial Services, you should know about the other risks facing this business. For example, India Financial Services has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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