Why You Might Be Interested In Pudumjee Paper Products Limited (NSE:PDMJEPAPER) For Its Upcoming Dividend
It looks like Pudumjee Paper Products Limited (NSE:PDMJEPAPER) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Pudumjee Paper Products' shares on or after the 24th of August will not receive the dividend, which will be paid on the 2nd of October.
The company's next dividend payment will be ₹0.60 per share, and in the last 12 months, the company paid a total of ₹0.60 per share. Looking at the last 12 months of distributions, Pudumjee Paper Products has a trailing yield of approximately 0.7% on its current stock price of ₹87.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Pudumjee Paper Products paid out just 6.1% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Pudumjee Paper Products generated enough free cash flow to afford its dividend. Dividends consumed 71% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Pudumjee Paper Products'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 Pudumjee Paper Products
Click here to see how much of its profit Pudumjee Paper Products 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. 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 Pudumjee Paper Products's earnings have been skyrocketing, up 25% 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. Pudumjee Paper Products has delivered 20% 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.
To Sum It Up
Is Pudumjee Paper Products an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Pudumjee Paper Products, and we would prioritise taking a closer look at it.
So while Pudumjee Paper Products looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Pudumjee Paper Products that we recommend you consider before investing in the business.
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.