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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Pearl Global Industries Limited (NSE:PGIL) has been paying a dividend to shareholders. Today it yields 1.5%. Does Pearl Global Industries tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Pearl Global Industries
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it be able to continue to payout at the current rate in the future?
How well does Pearl Global Industries fit our criteria?
Pearl Global Industries has a trailing twelve-month payout ratio of 18%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Although PGIL’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Pearl Global Industries generates a yield of 1.5%, which is high for Luxury stocks but still below the market’s top dividend payers.
Next Steps:
If you are building an income portfolio, then Pearl Global Industries is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant factors you should further examine: