Pressman Advertising's (NSE:PRESSMN) Dividend Will Be ₹1.00

Pressman Advertising Limited (NSE:PRESSMN) will pay a dividend of ₹1.00 on the 17th of August. This payment means that the dividend yield will be 2.8%, which is around the industry average.

View our latest analysis for Pressman Advertising

Pressman Advertising's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Pressman Advertising's dividend was only 52% of earnings, however it was paying out 167% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, EPS could fall by 8.1% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 54%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Pressman Advertising's Dividend Has Lacked Consistency

Pressman Advertising has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2013, the first annual payment was ₹0.80, compared to the most recent full-year payment of ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Pressman Advertising has seen earnings per share falling at 8.1% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Pressman Advertising's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Pressman Advertising is earning enough to cover the payments, the cash flows are lacking. We don't think Pressman Advertising is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 6 warning signs for Pressman Advertising (of which 2 shouldn't be ignored!) 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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