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

Indo National Limited (NSE:NIPPOBATRY) has announced that it will be increasing its dividend on the 29th of October to ₹25.00. This makes the dividend yield 2.4%, which is above the industry average.

Check out our latest analysis for Indo National

Indo National's Dividend Is Well Covered By Earnings

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.

If the trend of the last few years continues, EPS will grow by 16.4% over the next 12 months. 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. The first annual payment during the last 10 years was ₹20.00 in 2011, and the most recent fiscal year payment was ₹25.00. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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. We are encouraged to see that Indo National has grown earnings per share at 16% per year over the past five years. Indo National definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Indo National's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Indo National's payments are rock solid. While Indo National is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Indo National (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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