Readers wishing to buy Limited persistent systems (NSE: PERSISTENT) for its dividend will have to make its move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not appear on the company books on the date of registration. In other words, investors can buy Persistent Systems shares before July 13 in order to be eligible for the dividend that will be paid on August 12.
The company’s next dividend payment will be 6.00 share per share, compared to last year, when the company paid a total of 20.00 to shareholders. Based on the value of last year’s payouts, Persistent Systems has a rolling 0.7% return on the current share price of 2,799.05. Dividends are an important source of income for many shareholders, but the health of the business is critical to sustaining those dividends. You have to see if the dividend is covered by profits and if it increases.
See our latest analysis for persistent systems
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Fortunately, Persistent Systems’ payout ratio is modest, at just 34% of profits. A useful secondary check can be to assess whether the persistent systems have generated enough free cash flow to pay its dividend. It paid 18% of its free cash flow as dividends last year, which is cautiously low.
It is positive to see that Persistent Systems’ dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher. margin of safety before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. For this reason, we are pleased to see that Persistent Systems’ earnings per share have grown 11% per year over the past five years. Earnings per share have grown rapidly and the company keeps the majority of its profits with the business. 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.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Since our data began 10 years ago, Persistent Systems has increased its dividend by around 32% per year on average. It is exciting to see that earnings and dividends per share have grown rapidly over the past few years.
Does Persistent Systems have what it takes to maintain its dividend payments? It’s great that Persistent Systems is increasing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. It’s disappointing that the dividend has been cut at least once in the past, but as it stands, the low payout ratio suggests a conservative approach to dividends, which we like. There is a lot to like about persistent systems, and we would prioritize taking a closer look.
So while Persistent Systems looks good from a dividend standpoint, it’s still worth being aware of the risks associated with this stock. Our analysis shows 3 warning signs for persistent systems and you should be aware of this before you buy any stocks.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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