Nippon Life India Asset Management's (NSE:NAM-INDIA) Dividend Will Be ₹10.00

Nippon Life India Asset Management Limited (NSE:NAM-INDIA) has announced that it will pay a dividend of ₹10.00 per share on the 17th of August. However, the dividend yield of 2.8% is still a decent boost to shareholder returns.

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. At the time of the last dividend payment, Nippon Life India Asset Management was paying out a very large proportion of what it was earning and 173% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 44.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Nippon Life India Asset Management

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 2018, the dividend has gone from ₹5.00 total annually to ₹18.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Nippon Life India Asset Management's Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Nippon Life India Asset Management has been growing its earnings per share at 24% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Nippon Life India Asset Management is not retaining those earnings to reinvest in growth.

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

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Nippon Life India Asset Management you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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