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

The board of Deepak Nitrite Limited (NSE:DEEPAKNTR) has announced that it will pay a dividend on the 13th of September, with investors receiving ₹7.50 per share. The dividend yield is 0.4% based on this payment, which is a little bit low compared to the other companies in the industry.

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Deepak Nitrite's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Deepak Nitrite's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 54.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Deepak Nitrite

Deepak Nitrite Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ₹1.00, compared to the most recent full-year payment of ₹7.50. This means that it has been growing its distributions at 22% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.8% per year. While growth may be thin on the ground, Deepak Nitrite could always pay out a higher proportion of earnings to increase shareholder returns.

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Deepak Nitrite (of which 1 shouldn't be ignored!) you should know about. Is Deepak Nitrite not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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