Tamil Nadu Newsprint and Papers (NSE:TNPL) Has Announced That Its Dividend Will Be Reduced To ₹1.00

Tamil Nadu Newsprint and Papers Limited's (NSE:TNPL) dividend is being reduced from last year's payment covering the same period to ₹1.00 on the 27th of October. However, the dividend yield of 2.3% is still a decent boost to shareholder returns.

View 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. However, Tamil Nadu Newsprint and Papers' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 17.1% over the next year if the trend from the last few years continues. 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹5.00 in 2014, and the most recent fiscal year payment was ₹6.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. 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

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. It's encouraging to see that Tamil Nadu Newsprint and Papers has been growing its earnings per share at 17% a year over the past five years. Tamil Nadu Newsprint and Papers definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Tamil Nadu Newsprint and Papers Looks Like A Great Dividend Stock

Overall, we think that Tamil Nadu Newsprint and Papers could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Tamil Nadu Newsprint and Papers (of which 1 can't be ignored!) 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.