Nelcast (NSE:NELCAST) Will Pay A Larger Dividend Than Last Year At ₹0.50

Nelcast Limited (NSE:NELCAST) will increase its dividend from last year's comparable payment on the 31st of August to ₹0.50. Despite this raise, the dividend yield of 0.3% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nelcast's stock price has increased by 59% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Nelcast's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Nelcast's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 0.7% over the next 12 months. 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.

View our latest analysis for Nelcast

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹0.70 in 2015 to the most recent total annual payment of ₹0.50. This works out to be a decline of approximately 3.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Nelcast's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Nelcast is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Nelcast you should be aware of, and 1 of them makes us a bit uncomfortable. Is Nelcast 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.