Pilani Investment and Industries (NSE:PILANIINVS) Has Announced A Dividend Of ₹15.00

The board of Pilani Investment and Industries Corporation Limited (NSE:PILANIINVS) has announced that it will pay a dividend of ₹15.00 per share on the 9th of October. Including this payment, the dividend yield on the stock will be 0.9%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Pilani Investment and Industries

Pilani Investment and Industries' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Pilani Investment and Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 36.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 5.9% by next year, which we think can be pretty sustainable going forward.

Pilani Investment and Industries Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹17.86 in 2012, and the most recent fiscal year payment was ₹15.00. The dividend has shrunk at around 1.7% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Pilani Investment and Industries has been growing its earnings per share at 36% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Pilani Investment and Industries' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 2 warning signs for Pilani Investment and Industries you should be aware of, and 1 of them is a bit unpleasant. Is Pilani Investment and Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.