NBCC (India)'s (NSE:NBCC) Dividend Will Be Increased To ₹0.54

NBCC (India) Limited (NSE:NBCC) will increase its dividend from last year's comparable payment on the 26th of October to ₹0.54. This makes the dividend yield 1.1%, which is above the industry average.

Check out our latest analysis for NBCC (India)

NBCC (India)'s Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. NBCC (India) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 47.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹0.25 in 2013 to the most recent total annual payment of ₹0.54. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

NBCC (India) May Find It Hard To Grow The Dividend

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. NBCC (India) hasn't seen much change in its earnings per share over the last five years.

NBCC (India)'s Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think NBCC (India) will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for NBCC (India) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.