Nahar Capital and Financial Services (NSE:NAHARCAP) Will Pay A Dividend Of ₹1.50

Nahar Capital and Financial Services Limited (NSE:NAHARCAP) will pay a dividend of ₹1.50 on the 12th of October. The dividend yield is 0.5% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Nahar Capital and Financial Services

Nahar Capital and Financial Services' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Nahar Capital and Financial Services is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 0.5% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 9.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The payments haven't really changed that much since 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Nahar Capital and Financial Services May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Nahar Capital and Financial Services hasn't seen much change in its earnings per share over the last five years. If Nahar Capital and Financial Services is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Nahar Capital and Financial Services' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Nahar Capital and Financial Services that investors need to be conscious of moving forward. Is Nahar Capital and Financial Services not quite the opportunity you were looking for? Why not check out our selection of top 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.