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Be Sure To Check Out Petronet LNG Limited (NSE:PETRONET) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Petronet LNG Limited (NSE:PETRONET) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Petronet LNG's shares on or after the 8th of November, you won't be eligible to receive the dividend, when it is paid on the 23rd of November.
The company's next dividend payment will be ₹7.00 per share, on the back of last year when the company paid a total of ₹10.00 to shareholders. Calculating the last year's worth of payments shows that Petronet LNG has a trailing yield of 3.0% on the current share price of ₹335.90. 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 Petronet LNG can afford its dividend, and if the dividend could grow.
See our latest analysis for Petronet LNG
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Petronet LNG has a low and conservative payout ratio of just 11% of its income after tax. 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 40% 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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Petronet LNG's earnings per share have been growing at 12% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Petronet LNG has lifted its dividend by approximately 26% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Petronet LNG worth buying for its dividend? It's great that Petronet LNG is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Petronet LNG, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Petronet LNG is facing. In terms of investment risks, we've identified 1 warning sign with Petronet LNG and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
About NSEI:PETRONET
Petronet LNG
Engages in the import, storage, regasification, and supply of liquefied natural gas (LNG) in India.
Outstanding track record with flawless balance sheet and pays a dividend.