Indo National (NSE:NIPPOBATRY) Is Increasing Its Dividend To ₹25.00

The board of Indo National Limited (NSE:NIPPOBATRY) has announced that it will be increasing its dividend on the 29th of October to ₹25.00. This will take the annual payment from 2.6% to 2.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Indo National

Indo National's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Indo National was paying only paying out a fraction of earnings, but the payment was a massive 259% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS could expand by 16.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the dividend has gone from ₹20.00 to ₹25.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Indo National has grown earnings per share at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Indo National's prospects of growing its dividend payments in the future.

Our Thoughts On Indo National's Dividend

Overall, we always like to see the dividend being raised, but we don't think Indo National will make a great income stock. While Indo National is earning enough to cover the payments, the cash flows are lacking. We don't think Indo National is a great stock to add to your portfolio if income is your focus.

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. To that end, Indo National has 4 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.
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