Be Sure To Check Out PNB Housing Finance Limited (NSE:PNBHOUSING) Before It Goes Ex-Dividend

Readers hoping to buy PNB Housing Finance Limited (NSE:PNBHOUSING) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase PNB Housing Finance's shares on or after the 1st of August, you won't be eligible to receive the dividend, when it is paid on the 20th of September.

The company's next dividend payment will be ₹5.00 per share, on the back of last year when the company paid a total of ₹5.00 to shareholders. Last year's total dividend payments show that PNB Housing Finance has a trailing yield of 0.5% on the current share price of ₹1013.50. 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.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PNB Housing Finance has a low and conservative payout ratio of just 6.7% of its income after tax. PNB Housing Finance paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Check out our latest analysis for PNB Housing Finance

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see PNB Housing Finance's earnings per share have risen 15% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PNB Housing Finance has seen its dividend decline 2.3% per annum on average over the past eight years, which is not great to see. PNB Housing Finance is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Has PNB Housing Finance got what it takes to maintain its dividend payments? Companies like PNB Housing Finance that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. PNB Housing Finance ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in PNB Housing Finance for the dividends alone, you should always be mindful of the risks involved. Be aware that PNB Housing Finance is showing 2 warning signs in our investment analysis, and 1 of those is significant...

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.