There's A Lot To Like About Persistent Systems' (NSE:PERSISTENT) Upcoming ₹20.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Persistent Systems Limited (NSE:PERSISTENT) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Accordingly, Persistent Systems investors that purchase the stock on or after the 31st of January will not receive the dividend, which will be paid on the 21st of February.

The company's next dividend payment will be ₹20.00 per share, and in the last 12 months, the company paid a total of ₹26.00 per share. Looking at the last 12 months of distributions, Persistent Systems has a trailing yield of approximately 0.4% on its current stock price of ₹6360.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Persistent Systems

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Persistent Systems's payout ratio is modest, at just 35% of profit. A useful secondary check can be to evaluate whether Persistent Systems generated enough free cash flow to afford its dividend. Over the last year it paid out 66% of its free cash flow as dividends, within the usual range for most companies.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Persistent Systems has grown its earnings rapidly, up 32% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Persistent Systems has delivered 24% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Persistent Systems for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Persistent Systems, and we would prioritise taking a closer look at it.

Curious what other investors think of Persistent Systems? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.