NCL Industries Limited (NSE:NCLIND) will pay a dividend of ₹1.50 on the 10th of March. The dividend yield will be 1.2% based on this payment which is still above the industry average.
NCL Industries’ Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn’t matter much if the payments can’t be sustained. However, prior to this announcement, NCL Industries’ dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 36.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.
NCL Industries’ Dividend Has Lacked Consistency
Looking back, NCL Industries’ dividend hasn’t been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₹2.00 in 2016 to the most recent total annual payment of ₹3.00. This means that it has been growing its distributions at 5.2% per annum over that time. It’s good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. NCL Industries might have put its house in order since then, but we remain cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it’s even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. NCL Industries has impressed us by growing EPS at 21% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
NCL Industries Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think NCL Industries might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we’ve picked out 1 warning sign for NCL Industries that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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