Tamil Nadu Newsprint and Papers (NSE:TNPL) Has Announced That It Will Be Increasing Its Dividend To ₹5.00

Tamil Nadu Newsprint and Papers Limited's (NSE:TNPL) dividend will be increasing from last year's payment of the same period to ₹5.00 on 25th of October. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.

See our latest analysis for Tamil Nadu Newsprint and Papers

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Tamil Nadu Newsprint and Papers was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 18.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 7.2%, 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. The payments haven't really changed that much since 10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tamil Nadu Newsprint and Papers has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Tamil Nadu Newsprint and Papers' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Tamil Nadu Newsprint and Papers that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.