Patel Integrated Logistics Limited (NSE:PATINTLOG) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
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 Patel Integrated Logistics Limited (NSE:PATINTLOG) 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Patel Integrated Logistics' shares on or after the 17th of September, you won't be eligible to receive the dividend, when it is paid on the 24th of October.
The company's next dividend payment will be ₹0.20 per share. Last year, in total, the company distributed ₹0.20 to shareholders. Last year's total dividend payments show that Patel Integrated Logistics has a trailing yield of 1.5% on the current share price of ₹13.18. 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. Patel Integrated Logistics paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Patel Integrated Logistics'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.
View our latest analysis for Patel Integrated Logistics
Click here to see how much of its profit Patel Integrated Logistics 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. That's why it's comforting to see Patel Integrated Logistics's earnings have been skyrocketing, up 115% per annum for the past five years. Patel Integrated Logistics is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
We'd also point out that Patel Integrated Logistics issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Patel Integrated Logistics's dividend payments per share have declined at 8.8% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Has Patel Integrated Logistics got what it takes to maintain its dividend payments? It's great that Patel Integrated Logistics 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. There's a lot to like about Patel Integrated Logistics, and we would prioritise taking a closer look at it.
While it's tempting to invest in Patel Integrated Logistics for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Patel Integrated Logistics (1 is potentially serious) 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.