Power Finance Corporation’s Dividend Strategy and Financial Performance in FY2024-25: Assessing Sustainability and Attractiveness as a High-Yield Dividend Stock

Power Finance Corporation (PFC) has emerged as a key player in India’s financial sector, with its FY2024-25 results underscoring robust profitability and a disciplined dividend strategy. The company reported a record consolidated profit after tax (PAT) of ₹17,352 crore for the fiscal year, a 28% year-on-year increase, driven by a 38% surge in net interest income (NII) to ₹12,092 crore in Q4FY25 [1]. This performance, coupled with a final dividend of ₹2.05 per share, brings the total dividend for FY2024-25 to ₹15.80 per share, reflecting a consistent payout pattern [1].

Financial Performance and Dividend Sustainability

PFC’s dividend payout ratio for FY2024-25 stands at 22.1%, indicating that the company distributed a modest portion of its earnings to shareholders while retaining capital for reinvestment [2]. This low ratio suggests a buffer for future volatility, as the company’s asset quality has improved significantly, with Gross NPA and Net NPA ratios declining to 1.94% and 0.39%, respectively [1]. However, cash flow dynamics reveal a mixed picture: operating cash flow turned negative (-₹922.69 crore), and investing cash flow also dipped (-₹23.12 crore), primarily due to capital expenditures [3]. The positive financing cash flow of ₹942.58 crore, likely from debt or equity financing, highlights the company’s ability to fund operations and dividends externally [3].

Attractiveness as a High-Yield Dividend Stock

With a current stock price of ₹381.80 as of August 29, 2025, PFC’s dividend yield for FY2024-25 can be approximated using the total dividend of ₹19.50 per share (as reported in some sources [4]). This yields a dividend yield of approximately 5.11% (₹19.50 ÷ ₹381.80), which is competitive in the Indian market. The company’s history of multiple interim dividends, including a recent ₹3.70 per share payout in June 2025 [4], further reinforces its reputation as a reliable income generator.

Risks and Considerations

While PFC’s low NPA ratios and strong earnings are positives, the negative operating cash flow raises questions about long-term sustainability without external financing. Additionally, the stock’s volatility—trading between ₹376.00 and ₹401.30 in August 2025 [4]—may deter risk-averse investors. However, the company’s ability to secure financing and its conservative payout ratio provide a degree of reassurance.

Conclusion

Power Finance Corporation’s FY2024-25 results demonstrate a balance between profitability and shareholder returns. The 22.1% payout ratio, combined with a 5.11% dividend yield, positions PFC as an attractive high-yield stock, though investors should monitor its reliance on financing and cash flow challenges. For those prioritizing income with moderate risk, PFC’s track record and asset quality make it a compelling option.

Source:
[1] Power Finance Corporation Q4 Results: Cons PAT jumps 11% to ₹8,358 crore, NII surges 38%, Dividend declared [https://m.economictimes.com/markets/stocks/news/power-finance-corporation-q4-results-cons-pat-jumps-11-to-rs-8358-crore-nii-surges-38-dividend-declared/articleshow/121313556.cms]
[2] Power Finance (NSEI:PFC) Dividend Yield, History and ... [https://simplywall.st/stocks/in/diversified-financials/nse-pfc/power-finance-shares/dividend]
[3] Power Finance Corp Cash Flow Annual [https://www.livemint.com/power-finance-corp/cash-flow-annual/companyid-s0003168]
[4] Power Finance Corporation Ltd Dividend [https://www.indmoney.com/stocks/dividend/power-finance-corporation-ltd-dividend]