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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 PTL Enterprises Limited (NSE:PTL) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 17th of July will not receive this dividend, which will be paid on the 29th of August.
Enterprises's upcoming dividend is ₹2.50 a share, following on from the last 12 months, when the company distributed a total of ₹2.50 per share to shareholders. Looking at the last 12 months of distributions, Enterprises has a trailing yield of approximately 6.0% on its current stock price of ₹41.7. If you buy this business for its dividend, you should have an idea of whether Enterprises's dividend is reliable and sustainable. So we need to investigate whether Enterprises can afford its dividend, and if the dividend could grow.
View our latest analysis for Enterprises
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. That's why it's good to see Enterprises paying out a modest 42% of its earnings. 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. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Enterprises 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. 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, Enterprises's earnings per share have been growing at 10% a year for the past five years.
Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.