Punjab Chemicals and Crop Protection (NSE:PUNJABCHEM) Has Announced A Dividend Of ₹3.00

The board of Punjab Chemicals and Crop Protection Limited (NSE:PUNJABCHEM) has announced that it will pay a dividend on the 3rd of September, with investors receiving ₹3.00 per share. This means the annual payment will be 0.3% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Punjab Chemicals and Crop Protection

Punjab Chemicals and Crop Protection's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Punjab Chemicals and Crop Protection's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 28.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.6% by next year, which is in a pretty sustainable range.

Punjab Chemicals and Crop Protection Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was ₹1.50 in 2019, and the most recent fiscal year payment was ₹3.00. This means that it has been growing its distributions at 19% per annum over that time. Punjab Chemicals and Crop Protection has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Punjab Chemicals and Crop Protection has seen EPS rising for the last five years, at 29% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Punjab Chemicals and Crop Protection Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Punjab Chemicals and Crop Protection that investors should know about before committing capital to this stock. 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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