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PI Industries Limited (NSE:PIIND) stock is about to trade ex-dividend in 3 days time. If you purchase the stock on or after the 29th of August, you won't be eligible to receive this dividend, when it is paid on the 30th of September.
PI Industries's next dividend payment will be ₹1.50 per share, on the back of last year when the company paid a total of ₹4.00 to shareholders. Looking at the last 12 months of distributions, PI Industries has a trailing yield of approximately 0.3% on its current stock price of ₹1144.9. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether PI Industries can afford its dividend, and if the dividend could grow.
Check out our latest analysis for PI Industries
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PI Industries has a low and conservative payout ratio of just 13% of its income after tax. A useful secondary check can be to evaluate whether PI Industries generated enough free cash flow to afford its dividend. It paid out an unsustainably high 309% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how PI Industries intends to continue funding this dividend, or if it could be forced to the payment.
While PI Industries's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were PI Industries to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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. Fortunately for readers, PI Industries's earnings per share have been growing at 18% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PI Industries has delivered an average of 46% per year annual increase in its dividend, based on the past 9 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.