Deepak Nitrite (NSE:DEEPAKNTR) Is Paying Out A Dividend Of ₹7.50

Deepak Nitrite Limited (NSE:DEEPAKNTR) will pay a dividend of ₹7.50 on the 5th of September. This means the annual payment will be 0.3% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Deepak Nitrite

Deepak Nitrite's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Deepak Nitrite was paying a whopping 96% as a dividend, but this only made up 13% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 78.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 8.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Deepak Nitrite Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ₹0.80 total annually to ₹7.50. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Deepak Nitrite has grown earnings per share at 36% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Deepak Nitrite's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Deepak Nitrite is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Deepak Nitrite that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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