NACL Industries (NSE:NACLIND) Will Pay A Dividend Of ₹0.15

The board of NACL Industries Limited (NSE:NACLIND) has announced that it will pay a dividend on the 29th of October, with investors receiving ₹0.15 per share. This payment means that the dividend yield will be 0.8%, which is around the industry average.

See our latest analysis for NACL Industries

NACL Industries' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, NACL Industries was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 12.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹0.15 in 2012, and the most recent fiscal year payment was ₹0.60. This means that it has been growing its distributions at 15% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. NACL Industries has impressed us by growing EPS at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NACL Industries' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for NACL Industries you should be aware of, and 1 of them is concerning. Is NACL Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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