PNB Gilts (NSE:PNBGILTS) Has Affirmed Its Dividend Of ₹1.00

PNB Gilts Ltd.'s (NSE:PNBGILTS) investors are due to receive a payment of ₹1.00 per share on 17th of October. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.

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PNB Gilts' Future Dividend Projections Appear 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. Based on the last payment, PNB Gilts was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Unless the company can turn things around, EPS could fall by 4.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 5.9%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for PNB Gilts

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹1.50 in 2015 to the most recent total annual payment of ₹1.00. The dividend has shrunk at around 4.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

PNB Gilts May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that PNB Gilts' earnings per share has fallen at approximately 4.4% per year over the past 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

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about PNB Gilts' payments, as there could be some issues with sustaining them into the future. While PNB Gilts is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, PNB Gilts has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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