Nippon Life India Asset Management (NSE:NAM-INDIA) Will Pay A Dividend Of ₹8.00

Nippon Life India Asset Management Limited's (NSE:NAM-INDIA) investors are due to receive a payment of ₹8.00 per share on 23rd of November. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

View our latest analysis for Nippon Life India Asset Management

Nippon Life India Asset Management's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Nippon Life India Asset Management was paying out quite a large proportion of both earnings and cash flow, with the dividend being 111% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Earnings per share is forecast to rise by 31.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Nippon Life India Asset Management's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was ₹5.00, compared to the most recent full-year payment of ₹16.50. This means that it has been growing its distributions at 19% per annum over that time. Nippon Life India Asset Management has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Nippon Life India Asset Management has grown earnings per share at 20% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Nippon Life India Asset Management's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think Nippon Life India Asset Management is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Nippon Life India Asset Management that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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