Akzo Nobel India (NSE:AKZOINDIA) Will Pay A Dividend Of ₹30.00

The board of Akzo Nobel India Limited (NSE:AKZOINDIA) has announced that it will pay a dividend of ₹30.00 per share on the 3rd of September. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.

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Akzo Nobel India's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 36.5%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 90% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for Akzo Nobel India

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ₹75.00 total annually to ₹95.00. This implies that the company grew its distributions at a yearly rate of about 2.4% 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.

Dividend Growth Could Be Constrained

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. It's encouraging to see that Akzo Nobel India has been growing its earnings per share at 13% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Akzo Nobel India'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 would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Akzo Nobel India that you should be aware of before investing. Is Akzo Nobel India 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.