Privi Speciality Chemicals Limited (NSE:PRIVISCL) Passed Our Checks, And It's About To Pay A ₹10.00 Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Privi Speciality Chemicals Limited (NSE:PRIVISCL) is about to go ex-dividend in just three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Privi Speciality Chemicals' shares before the 31st of July to receive the dividend, which will be paid on the 6th of September.
The company's next dividend payment will be ₹10.00 per share. Last year, in total, the company distributed ₹10.00 to shareholders. Last year's total dividend payments show that Privi Speciality Chemicals has a trailing yield of 0.3% on the current share price of ₹3595.20. If you buy this business for its dividend, you should have an idea of whether Privi Speciality Chemicals's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Privi Speciality Chemicals has a low and conservative payout ratio of just 12% 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. Luckily it paid out just 8.5% of its free cash flow last year.
It's positive to see that Privi Speciality Chemicals'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.
Check out our latest analysis for Privi Speciality Chemicals
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. 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 Privi Speciality Chemicals's earnings have been skyrocketing, up 23% per annum for the past five years. Privi Speciality Chemicals 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Privi Speciality Chemicals has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
From a dividend perspective, should investors buy or avoid Privi Speciality Chemicals? It's great that Privi Speciality Chemicals is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Privi Speciality Chemicals for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Privi Speciality Chemicals you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.