Should You Buy Pearl Global Industries Limited (NSE:PGIL) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Pearl Global Industries Limited (NSE:PGIL) is about to trade ex-dividend in the next 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. Accordingly, Pearl Global Industries investors that purchase the stock on or after the 22nd of November will not receive the dividend, which will be paid on the 11th of December.

The company’s next dividend payment will be ₹2.50 per share, and in the last 12 months, the company paid a total of ₹5.00 per share. Looking at the last 12 months of distributions, Pearl Global Industries has a trailing yield of approximately 1.2% on its current stock price of ₹404.55. If you buy this business for its dividend, you should have an idea of whether Pearl Global Industries’s dividend is reliable and sustainable. So we need to investigate whether Pearl Global Industries can afford its dividend, and if the dividend could grow.

See 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 10% of its income after tax. Pearl Global Industries paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Pearl Global Industries’s earnings have been skyrocketing, up 21% per annum for the past five years.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Pearl Global Industries has lifted its dividend by approximately 20% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Pearl Global Industries for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it’s usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Pearl Global Industries ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

On that note, you’ll want to research what risks Pearl Global Industries is facing. For instance, we’ve identified 2 warning signs for Pearl Global Industries (1 is a bit unpleasant) you should be aware of.

If you’re in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.