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 1.6% 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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. 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 17.1% if recent trends continue. 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.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹5.00 in 2014, and the most recent fiscal year payment was ₹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 see if earnings per share is growing. 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. 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

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Tamil Nadu Newsprint and Papers has the makings of a solid income stock moving forward. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 is significant!) 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