NCL Industries (NSE:NCLIND) Will Pay A Dividend Of ₹1.50

The board of NCL Industries Limited (NSE:NCLIND) has announced that it will pay a dividend of ₹1.50 per share on the 25th of October. This means the annual payment is 1.3% of the current stock price, which is above the average for the industry.

See our latest analysis for NCL Industries

NCL Industries' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, NCL Industries was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 153.0% over the next year. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

NCL Industries' Dividend Has Lacked Consistency

Looking back, NCL Industries' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from ₹2.00 total annually to ₹3.00. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that NCL Industries' earnings per share has fallen at approximately 5.0% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 4 warning signs for NCL Industries you should be aware of, and 1 of them is a bit unpleasant. Is NCL Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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