PIOC offers a 7% dividend yield: what makes it stand out?
In a market where most cement companies offer minimal payouts, Pioneer Cement (PIOC) is quietly delivering big on dividends. With a projected dividend yield of 7% in FY25 and 8% in FY26, PIOC is offering income-focused investors a significant edge over the sector average yield of just 1%.
Sector overview: cost pressures and low utilization weigh on margins
FY25 was a mixed year for the cement sector. While pricing discipline helped manage external shocks like increased royalty charges, overall profitability remained under pressure. Companies struggled with low capacity utilization and high input costs. For PIOC, capacity utilization was just 41% in 4QFY25, limiting operating leverage. Additionally, gross margins declined by 4.9 percentage points YoY, reflecting broader sector challenges.
Company overview: stable fundamentals with a focus on payouts
Despite facing margin pressures and a 3% YoY decline in FY25 earnings, PIOC has maintained a consistent dividend policy. In 4QFY25, earnings per share are expected to clock in at Rs5.62, slightly lower than the Rs5.93 earned in the same period last year. However, the impact on the bottom line is softened by a 53% drop in finance costs, aided by falling interest rates.
For the full year FY25, earnings are projected at Rs22.11/share, and the company is expected to announce a cash dividend of Rs9/share with the results, taking the full-year payout to Rs14/share. That translates into a solid dividend yield of 7%, far above what most sector peers are offering.
Financial snapshot
| Metric | FY25E | FY26F | FY27F |
|---|---|---|---|
| EPS (PKR) | 27.97 | 31.05 | 35.40 |
| EPS Growth (%) | 23% | 11% | – |
| DPS (PKR) | 16.0 | 19.0 | – |
| Dividend Yield (%) | 7% | 8% | – |
| P/E (x) | 8.1 | 7.3 | – |
| P/B (x) | 1.1 | 1.0 | – |
| Target Price (PKR) | 260 | – | – |
| Current Price (PKR) | 226 | – | – |
| Total Return (%) | 23% | – | – |
Why are analysts bullish?
Analysts are optimistic about PIOC’s outlook due to its attractive valuation and high dividend payout policy. With earnings expected to grow by 23% in FY25 and 11% in FY26, the company is in a solid position to sustain and even increase payouts. Moreover, falling financial charges and improved cost management are expected to support earnings despite sector-wide pressures.
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Risks to watch
Despite strong dividend payouts, there are some red flags to consider. Low capacity utilization, exposure to input cost volatility, and regulatory changes like royalty adjustments could affect profitability. Additionally, any depreciation in the rupee could impact margins, especially if coal prices rebound. Nonetheless, PIOC’s consistent earnings and shareholder-friendly policies make it a compelling pick for income-focused investors.
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PIOC’s projected 7% dividend yield in FY25 makes it a clear outlier in the cement sector. With stable fundamentals, growing earnings, and prudent cost controls, the company offers both value and income, a rare combination in today’s market.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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