Navin Fluorine International (NSE:NAVINFLUOR) Is Increasing Its Dividend To ₹7.00

The board of Navin Fluorine International Limited (NSE:NAVINFLUOR) has announced that the dividend on 30th of August will be increased to ₹7.00, which will be 17% higher than last year's payment of ₹6.00 which covered the same period. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.

Check out our latest analysis for Navin Fluorine International

Navin Fluorine International's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Navin Fluorine International'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.

The next year is set to see EPS grow by 118.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 8.0%, which is in the range that makes us comfortable with the sustainability of the dividend.

Navin Fluorine International Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ₹3.00 in 2013 to the most recent total annual payment of ₹11.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Navin Fluorine International has seen EPS rising for the last five years, at 16% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Navin Fluorine International that investors need to be conscious of moving forward. Is Navin Fluorine International 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.