Tamil Nadu Newsprint and Papers' (NSE:TNPL) Dividend Is Being Reduced To ₹1.00

Tamil Nadu Newsprint and Papers Limited (NSE:TNPL) is reducing its dividend from last year's comparable payment to ₹1.00 on the 27th of October. However, the dividend yield of 1.5% is still a decent boost to shareholder returns.

Check out our latest analysis for Tamil Nadu Newsprint and Papers

Tamil Nadu Newsprint and Papers' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Tamil Nadu Newsprint and Papers' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 17.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

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. The dividend has gone from an annual total of ₹5.00 in 2014 to the most recent total annual payment of ₹4.00. The dividend has shrunk at around 2.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Tamil Nadu Newsprint and Papers has grown earnings per share at 17% 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.

Tamil Nadu Newsprint and Papers Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Tamil Nadu Newsprint and Papers does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

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. Case in point: We've spotted 3 warning signs for Tamil Nadu Newsprint and Papers (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com