PCBL Chemical (NSE:PCBL) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy PCBL Chemical Limited (NSE:PCBL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase PCBL Chemical's shares before the 16th of January in order to be eligible for the dividend, which will be paid on the 9th of February.

The company's next dividend payment will be ₹5.50 per share, on the back of last year when the company paid a total of ₹5.50 to shareholders. Last year's total dividend payments show that PCBL Chemical has a trailing yield of 1.4% on the current share price of ₹391.10. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for PCBL Chemical

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 39% of the free cash flow it generated, which is a comfortable payout ratio.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that PCBL Chemical's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, PCBL Chemical has increased its dividend at approximately 56% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid PCBL Chemical? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but PCBL Chemical is halfway there. PCBL Chemical looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 3 warning signs for PCBL Chemical (1 shouldn't be ignored) you should be aware of.

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.