Why You Might Be Interested In Pearl Global Industries Limited (NSE:PGIL) For

It looks like Pearl Global Industries Limited (NSE:PGIL) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Pearl Global Industries’ shares before the 1st of September in order to receive the dividend, which the company will pay on the 20th of September.

The company’s upcoming dividend is ₹5.00 a share, following on from the last 12 months, when the company distributed a total of ₹10.00 per share to shareholders. Calculating the last year’s worth of payments shows that Pearl Global Industries has a trailing yield of 1.5% on the current share price of ₹682.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Pearl Global Industries has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Pearl Global Industries

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Pearl Global Industries has a low and conservative payout ratio of just 11% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What’s good is that dividends were well covered by free cash flow, with the company paying out 2.8% of its cash flow last year.

It’s positive to see that Pearl Global Industries’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Pearl Global Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It’s encouraging to see Pearl Global Industries has grown its earnings rapidly, up 46% a year for the past five years. Pearl Global Industries looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Pearl Global Industries has delivered 26% 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid Pearl Global Industries? Pearl Global Industries has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it’s cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Pearl Global Industries looks solid on this analysis overall, and we’d definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 1 warning sign for Pearl Global Industries and you should be aware of this before buying any shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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…