Tamil Nadu Newsprint and Papers (NSE:TNPL) Is Paying Out A Larger Dividend Than Last Year

Tamil Nadu Newsprint and Papers Limited (NSE:TNPL) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of October to ₹5.00. This will take the annual payment to 2.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Tamil Nadu Newsprint and Papers

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Tamil Nadu Newsprint and Papers was easily earning enough to cover the dividend. 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 44.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.0% 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 last annual payment of ₹5.00 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. Tamil Nadu Newsprint and Papers has impressed us by growing EPS at 45% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Tamil Nadu Newsprint and Papers' Dividend

Overall, a dividend increase is always good, and we think that Tamil Nadu Newsprint and Papers is a strong income stock thanks to its track record and growing earnings. 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. Is Tamil Nadu Newsprint and Papers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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