Nilkamal (NSE:NILKAMAL) Has Affirmed Its Dividend Of ₹20.00

The board of Nilkamal Limited (NSE:NILKAMAL) has announced that it will pay a dividend of ₹20.00 per share on the 18th of August. Based on this payment, the dividend yield on the company's stock will be 1.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Nilkamal

Nilkamal's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Nilkamal was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 0.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ₹4.00 total annually to ₹20.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year 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.

Nilkamal May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Nilkamal's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, Nilkamal has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Nilkamal's Dividend

Overall, we think Nilkamal is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For instance, we've picked out 1 warning sign for Nilkamal that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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